Analyst Steven Milunovich of UBS gave his take on Apple Inc. (NASDAQ:AAPL) iPhone sales ahead of the release of its iPhone 7 this fall. The analyst updated his iPhone demand model and is now expecting to see moderates single-digit iPhone growth in 2017 for the iPhone 7. He then anticipates seeing a strong gain of close 20% in 2018. This increase also led Milunovich to change his EPS for 2017 and 2018 to $9 and $10.80, respectively.

The analyst details his model and discusses how he “considers each year of iPhone sales as a class and estimates the percent upgrading in two years, three years, etc.” He explains how the worse a year is, for example 2017, the better 2018 iPhone sales will be “assuming retention rates remain high.”

iPhone units demand is a combination of upgrades and new customers. It is easier for the analyst to predict upgrades, but it is harder for him to predict new customers. Nonetheless, Milunovich has a 4% decline in new additions for 2016, based on Apple’s indications. Additionally, he has 10% annual declines for future years due to “rising smartphone penetration and slower China growth.”

This is the first time that Milunovich has increased his iPhone demand estimates and thus is expecting to see stock gains. He sees limited risk due to Apple’s low valuation.

The analyst maintains his Buy rating with a price target of $115, marking a 9% increase from current levels.

According to TipRanks, the analyst has a yearly average return of 2.3% and a 49% success rate. The analyst has a 2% average return when recommending AAPL, and is ranked #1,069 out of 4,085 analysts.

TipRanks shows that out of the 39 analysts who rated AAPL in the last 3 months, 85% gave a Buy rating, 10% gave a Hold rating and 5% gave a Sell rating. The average 12-month price target for the stock is $123.82, marking a 17.04% upside from current levels.


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