Apple (AAPL) PT Raised to $177 at Morgan Stanley; Retention Rate Rise into Supercycle

May 17, 2017 8:35 AM EDT
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Morgan Stanley analyst Katy Huberty raised her price target on Apple (NASDAQ: AAPL) to $177.00 (from $161.00) while maintaining a Overweight rating following a new survey showing a rise in the retention rate.

Huberty notes a new AlphaWise survey points to a 92% US iPhone loyalty rate versus 86% last year. Apple's loyalty rate of 92% dwarfs that of all other vendors, with Samsung garnering a 77% retention rate, followed by LG (59%), Motorola (56%),and Nokia (42%).

The analyst notes that with Apple and Samsung controlling an estimated 79% of the US smartphone market, the opportunity to win switchers from other brands shrink.

However, the higher customer retention rate more than offsets the smaller switcher opportunity in the US. This will results in an expected 352bps share gain over the next 12 months,higher than the 274 bps gain expected in our survey a year ago.

The firm's new survey points to 72M North America iPhone shipments versus their 70M estimate. The increase in North America estimate drives the firm's bottom-up Global iPhone upgrade forecast to 266M units vs. 264M prior. "While we maintain our FY18 unit/ASP estimates of 260M and $743(both 9-10% above cons), the upside implied by the new survey data makes even our above consensus estimates look conservative."

The price target is based on a multiple of 15.4x, in line with the high-end of the peak during the iPhone 6 supercycle.

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