Connect with us

Technology

Apple event hardware launches provides ample dry powder to investors: UBS

Published

on

With Apple expected to unveil three iPhone models on Wednesday, the company will demonstrate why it has one of the world’s only persistent hardware revenue streams, according to UBS analysts. 

In a note on Tuesday, Timothy Arcuri and Munjal Shah forecast the new devices would drive iPhone sales up 6% next year, and help its stock price to surge 13% over the next 12 months.

The iPhone maker is expected to announce a new “Xs” model that’s a successor to the iPhone X, and an iPhone Xs Max with a bigger size OLED screen. Apple is also expected to launch a third, cheaper model which has a less-expensive LCD screen instead of OLED.

The hardware leaks, reported by Bloomberg and other publications, suggest that “Apple is turning into a recurring business model for hardware and services,” Arcuri and Shah said. They described Apple as having “one of the planet’s only recurring hardware revenue streams.”

Even with Apple’s hardware business trading at a premium to its peers, there “still seems ample dry powder” as the stock remains a top underweight with active managers, UBS said.

They added: “Our belief is that consumers upgrade their smartphones when there is a meaningful form factor change. We anticipate a bigger OLED screen iPhone to be a strong driver this year. UBS Evidence Lab data suggests decline in average iPhone age signs of stabilization in replacement cycles. We also expect US and W. Europe shipments to see growth given our belief in the two-year purchase cadence. iPhone has now become a recurring revenue model with consumers less likely to switch to an alternative.”

UBS forecast iPhone revenues to rise 6% in fiscal year 2019, which will come from 4% unit growth and a 2% increase in average selling prices.

The analysts said service revenue could grow 20% per year during the next two years due to “increased penetration, shift to favorable mix, and potentially new service offerings.” This could contribute to around 4% sales growth overall, they said. 

Arcuri and Shah lifted their price target to $250 from $215 — 13% above its current price — and maintained a “buy” rating on Apple.

Continue Reading
Advertisement Find your dream job

Trending