Analysts from Piper Jaffray and Normura Holdings weigh in on tech giant Apple Inc. (NASDAQ:AAPL) and computing giant Microsoft Corporation (NASDAQ:MSFT) following iPhone survey and a transition to Office 365. Both are bullish about the two companies due to shrinking iPhone upgrade cycles and the continued use of and transition to Office 365.

Apple Inc.

Piper Jaffray Gene Munster weighed in yesterday on Apple following the results from a survey of 236 iPhone users. The results indicated that 31% of iPhone 6S users plan on upgrading their iPhone every 18 months, while 18.5% prefer to upgrade their phones every 12 months. Although the analyst does not have prior data, as this is the first survey of its kind from the analyst, he believes the results indicate “that the shift of US carriers to an installment-based smartphone sales model is enabling users to upgrade their devices more frequently.” He expects Apple to reach its desired 15 month upgrade levels as the users who plan to upgrade every 18 months are “only a few months into the standardization of annual upgrade programs, driven in part by the iPhone Upgrade Program.” Related, Munster believes that most consumers, excluding those who are frugal and less technical, realize if they do not upgrade their phones after one year they will have to pay the same installment fee for an older device with declining value. The analyst states that he expects a narrowing of iPhone upgrade cycles to 15 months per average user, down from 22 months today. He concludes that the shrinking upgrade cycles will “have a 3% tailwind to US units over 3-4 years starting in late 2016 and a ~5% tailwind to overall units as the installment programs become common in International markets.” Munster reiterated an overweight rating on Apple with a price target of $179.

According to TipRanks’ statistics, analyst Gene Munster has a 70% success rate recommending stocks with an average return of 24.7% per recommendation. Munster has a yearly average return of 25.5% when recommending AAPL, and is ranked #1 out of 3858 analysts. Out of the 38 analysts who have rated AAPL in the last 3 months, 29 gave a Buy rating while 9 remain on the sidelines. The average 12-month price target for the stock is $148.85, marking a 26% upside from where shares last closed.Gene Munster Stats

Microsoft Corporation

Analyst Frederick Grieb of Normura Holdings weighed in on Microsoft Corporation yesterday after analyzing the impact of the Commercial Office 356 model transition. The report is based on a few scenarios based on enterprise customers moving to Office 365. He believes that all of the Office 365 migrations will lead to increased revenues as well as gross profit dollars to the company, noting that the migration from a transnational Enterprise customer will yield the most benefit. The analyst states that “our transition models suggest Microsoft is past the trough of the model switch”. They expect Office revenues to increase at a compounded annual growth rate of 8% for FY2015-FY2020, which they attribute to “9% CAGR in Commercial Office revenues and a 1% CAGR in Consumer office revenues”. The analyst states that his forecasted growth rate for the Productivity and Business Process segment of Microsoft for FY2017 is 7% above Street consensus. He believes this prediction signals the transition to Office 365 will be more profitably for Microsoft than current expectations.

Griev also states that the introduction of Apple’s iPad Pro will not make a significant difference for Microsoft. He believes that although customers might switch to Apple’s new product from a Windows device, they would continue using Office software and would maintain their office 265 subscription on the Ipad Pro. The analyst states that although beliefs that Microsoft would suffer as a result of lost windows revenue, the NPV (net present value) of Microsoft revenues only increases by the use of iPad Pro, assuming the customer switches from Office to Office 365. Contributing to this likely insignificance is  a relatively high percentage of the installed base using Office 365, 9% consumer and 25% commercial.

The analyst concludes reiterates his Buy rating on Microsoft, raising his price target to $60 from $55. He continues, “We are positive on the stock as we believe the transition of customers to Office 365 to Office is trending ahead of plan and that this transition should drive growth in revenues and profits for Microsoft’s most profitable business. Additionally, we expect declines in the Windows business to moderate, removing a key headwind to growth and for the company to continue to outperform on the operating expense side of the business as management continues to streamline the company.”

Overall, Frederick Grieb has an 83% success rate recommending stocks with an average return of 25.2% per recommendation. He has rated MSFT 7 times since 2013, with a success rate of 83% on the stock and an average return of 20%. According to TipRanks’ statistics, out of the 21 analysts who have rated MSFT in the last 3 months, 14 gave a Buy rating, 2 gave a Sell rating, and 5 remain on the sidelines. The average 12-month price target for the stock is $55.43, marking a 2% upsides from where shares last closed.Frederick Grieb Stats