Apple: Deutsche Bank Survey Points to Strong iPhone Upgrade Cycle

Recent reports have noted that Apple (AAPL) has ordered manufacturers to increase the build speed for the first batch of new iPhones from 75 million to 90 million – a clear sign that the company expects to sell more units in the near term than previously expected.

Deutsche Bank Sydney Ho notes that this is in line with a recent dbDIG survey, which points to “strong consumer interest” in upgrading to 5G.

As to why someone is planning to buy a new iPhone, the survey found that 5G/higher connection speed was the top reason (26%) for an upgrade.

“While there has been some resistance from investors that the next iPhone launch won’t offer many new features over the iPhone 12 family,” Ho said, “65% of those surveyed said they had an iPhone that didn’t offer 5G. (iPhone 11 Family and older), so that feature should be a strong incentive to upgrade yourself.”

41% also said they are “extremely” or “somewhat” likely to buy a new smartphone in the next 3 months, which, incidentally, should be within the timeframe of the iPhone 13’s launch.

It is highly likely that iPhone owners also own other Apple products, with 79% saying they had at least one Apple device other than the iPhone. Ho says the data supports his belief that “$per person spent on Apple devices continues to grow.”

The tech giant reports F3Q earnings after the market closed on Tuesday, July 27, with the Street estimating revenues to fall 18% quarter-over-quarter, but Ho believes Apple is “well positioned” to meet analyst expectations. as “potential earnings upward” in iPhones (both units and ASPs), Accessories (AirTags), and based on preliminary Gartner data also Macs. Ho thinks the company is still reaping the benefits of the remote work/school environment, while the impact of a component shortage on its Mac and iPad operations has been “discounted enough.”

Looking ahead to F4Q, the “ongoing healthy comments” about Apple’s supply chain, dbDIG iPhone survey data and increased build speed suggest “risks weighted to the upside,” although the 5-star analyst says component shortages are impacting the Mac/iPad (not iPhone) “remains an area to check.”

Overall, Ho reiterated a buy recommendation for AAPL stock, while the $165 price target suggests the stock will add 16% muscle over the next 12 months. (To view Ho’s record, click here)

Ho’s target is just above Street’s average target, which at $159.04 suggests a 9% share price increase in the coming year. Looking at the consensus distribution, based on 20 buys, 5 held and 2 sells, the analysts rate this stock as a moderate buy. (See Apple stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.