Fears About Slowing Apple (AAPL) Growth 'Premature', Oppenheimer Says

Oppenheimer analyst Andrew Uerkwitz reiterated an Outperform rating and $155 price target on Apple (NASDAQ: AAPL) Thursday, saying fear of slower growth is "premature."

Uerkwitz commented, "Over the next nine months, we expect investors to doubt if Apple can deliver the same growth with quarters of tough comps ahead. In fact, we believe some will argue that Apple will record its first year-over-year decline of iPhone sales in FY15. This could put pressure on the stock as investors may start to believe that the iPhone growth story has run its course. We believe investors’ fear of declining iPhone sales is premature due to Apple’s share gain over Android and sales momentum in China. Moreover, we believe Apple’s ecosystem, new product categories, and shareholder-friendly actions will keep earnings growth trajectory above consensus expectations while new revenue growth engines emerge."

The analyst cites a strong and growing installed base. "... assuming 15% market share and a 2.25-year replacement cycle, we believe Apple will have 217M units demand from replacement alone, more than half of which will be contributed by the US and China markets."

Uerkwitz also finds the ecosystem advantage of iOS over Android expanding more quickly post iOS 8 (Apple Pay, HealthKit, and HomeKit) and Apple Watch release. "In the past nine months, Android OEMs were unable to offer any competent, competing solutions that may help reverse the share loss trend, in our view," the analyst said.

Further the analyst said the Street consensus for FY16 implies a very low expectation for Apple's earnings power and we believe Apple will continue to deliver "beat-and-raise" quarters in FY16.

The analyst also expects the company's sales momentum in China to continue, with market share gain on the high-end phones as well as deeper penetration across product categories. We find untapped growth potential for Apple in China due to its underutilized ecosystem. We expect 20M incremental iPhone unit growth in 2015 from China.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $130.06 yesterday.

You May Also Be Interested In

• Midday movers: PepsiCo, JetBlue fall; GM, Danaher and UPS rise
• Range Resources (RRC) Tops Q1 EPS by 11c; offers production guidance
• Apple (AAPL) announces 'Let Loose,' a special online event to be held in May