Canaccord analyst Michael Walkley was out today with an updated macro model, showing that Apple Inc.(NASDAQ:AAPL) maintained its strong share of the premium-tier global smartphone market during Q4/C2015, enabling Apple to capture over 90% of industry profits.
Walkley said, “Despite slowing global smartphone sales during 2H/2015 and anticipated for 1H/2016, we believe the iPhone 6/6S products should continue to maintain strong share in the premium tier smartphone market. In fact, with only 40% of the iPhone installed base having upgraded to the iPhone 6/6 Plus devices by Q4/C2015, we anticipate continued strong replacement sales through C2017.”
Furthermore, the analyst anticipates continued high-end smartphone market share gains for the larger screen iPhone 6/6S devices as his surveys indicate premium tier Android smartphone consumers are switching to the iPhone. “Only Samsung remains consistently profitable among the Android smartphone OEMs that share profit figures. We believe these trends enabled the iPhone installed base to reach over 500M exiting C2015, and this base should drive strong future iPhone replacement sales, earnings, as well as cash flow generation to fund strong long-term capital returns programs,” the analyst noted.
That said, Walkley has lowered his smartphone growth estimates for 2016 and 2017. The analyst anticipates smartphone sales will decline 4.4% during Q1/2016 to 318M units. For 2016, Walkley anticipates only 3.0% smartphone unit growth versus 8.5% in 2015 and down from the 25.6% growth rate in 2014.
The analyst reiterated a Buy rating on shares of Apple, with a price target of $146, which represents a potential upside of 55% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Walkley has a yearly average return of 9.7% and a 52.9% success rate. Walkley has a 22% average return when recommending AAPL, and is ranked #55 out of 3564 analysts.
In addition, while a softer 1H/C2016 smartphone market could limit near-term results and guidance relative to consensus, Walkley believes that Apple supplier Skyworks Solutions Inc (NASDAQ:SWKS) is positioned for healthy long-term growth trends. “We believe Skyworks’ broad portfolio of custom integrated solutions should enable dollar content share growth in Apple’s and Samsung’s premium tier smartphones and grow content share in the fast growing Chinese LTE smartphone market. We also believe Skyworks’ diverse analog portfolio positions its broad market division for 20% plus annual growth driven by content share in markets such as 802.11ac, wireless infrastructure, and the IoT market.”
Walkley reiterated a Buy rating on shares of Skyworks, with a price target of $105, which implies an upside of 82% from current levels. According to TipRanks.com, Walkley has a 30% average return when recommending SWKS.