Following the results of a survey polling over 6,500 teenagers on preferences and habits, analyst Gene Munster of Piper Jaffray provides updates on tech giants Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), and Amazon.com, Inc. (NASDAQ:AMZN). While Apple and Amazon show promising growth trends thanks to increasing popularity among teenagers, the analyst assures investors not to worry about Facebook-owned Instragram’s decreasing popularity levels. Ultimately, the analyst remains enthusiastically bullish about all three companies.
According to TipRanks, Munster ranks #4 out of over 3,800 analysts on Wall Street. He has a 65% success rate recommending stocks with a 19% average one-year return per rating.
Results from Munster’s survey showed promising trends for the iPhone and Apple Watch among teenagers. An all-time high of 69% of teenagers surveyed owned iPhones, as compared to 67% last year. Furthermore, 75% of teens expect their next phone to be an iPhone. Munster elaborates, “We continue to expect small positive changes in the share numbers for iPhone given purchase intent and the over indexing of teens to the U.S. in total, where we believe iPhone has around 50% share.”
Turning to the Apple Watch, a new product criticized by many for failing to gain traction, Munster points out that 71% of smartwatch owners polled own an Apple Watch. Since 12% of teens surveyed own a smartwatch, this figure means that about 8%, or 550 of teenagers surveyed, own an Apple Watch. Ten percent of teens surveyed are interested in purchasing an Apple Watch. Munster comments, “We would expect the Apple Watch to maintain market share close to that of iPhone, but don’t expect major changes in interest until stronger use cases emerge.”
Munster notes that teen’s interest in tablets is declining, but is not bothered by this fact as he expects “teen interest in tablets to remain relatively stable to slightly below current levels going forward.” Overall, Apple remains the analyst’s top pick for 2016, bolstered by the brand loyalty indicated in the teen survey. Munster reiterates an Overweight rating on Apple with a $172 price target.
According to TipRanks, 33 analysts are bullish on Apple while 3 remain neutral. The average 12-month price target between these 36 analysts is $136.25, marking a 23% potential upside.
A moment of silence for Instagram, which has fallen to second place for the most-preferred social network for teens, behind Snapchat. Munster explains that he expected Snapchat to overtake Twitter, as it did, but he did not expect the ephemeral social media application to move past Facebook-owned Instagram.
While this data is surprising, Munster urges investors “not to overreact.” He explains, “Facebook lost its top spot among teens over three years ago and has gone on to produce strong double digit y/y growth in that period off a large base.” Furthermore, it remains a close call as 28% of teens voted Snapchat the most important network while 27% voted for Instagram.
Lastly, Munster believes that Instagram remains “significantly undermonetized.” While Instagram just started rolling out advertising options, there is plenty room to bolster revenue streams. Munster reiterates an Overweight rating on Facebook with a $170 price target.
According to TipRanks, 33 analysts are bullish on Facebook, 1 is bearish, and 3 are neutral. The average 12-month price target between these 37 analysts on the social media giant is $134.97, marking a 22% potential upside.
Results from the teen survey indicated promising trends for Amazon, both in terms of mindshare and Prime growth. Munster says that Amazon has “taken mindshare among teens,” now commanding 41%. He elaborates, “Amazon is clearly taking share from other top websites,” such as Nike and eBay. He continues, “Amazon is now well positioned to retain mindshare, driving long-term, generational growth.”
Furthermore, Prime adoption continues to grow at about 20% year-over-year, with 51% of teens surveyed indicating their families own a Prime membership. Munster believes that 57 million to 61 million households in the US subscribe to Amazon Prime, with the near-term possibility to add an additional 16 million members.
In light of these promising trends, Munster reiterates his Overweight rating on Amazon with an $800 price target.
According to TipRanks, 32 analysts are bullish on Amazon while 4 remain neutral. The average 12-month price target between these 36 analysts is $750, marking 24% potential upside.