- Apple represented over 50% of all handset industry revenues – Long remains positive on Apple as the tech giant regained the top market share spot in the quarter, with 19% of global smartphone shipments. Apple also registered the highest ASP ever, at $700, which propelled the company’s revenue share to 50% of all global handset revenue. The analyst believes the share gain of the installed base should allow these trends to continue as second-hand sales set up opportunities for future upgrades to brand new phones.
- Updating Qualcomm model – Long updated Qualcomm model to reflect the latest 3G/4G shipment view. The analyst’s EPS estimates go to $4.35/$4.32 from $4.38/$4.21 on a standalone basis. Management now models 3G/4G units growing 6-10% in CY2016. By Long’s estimates, 3G/4G units were up 3% in 2016. Management has also maintained its view of 4-10% growth in CY2017. Long’s own estimates are in the lower half of that range, at 6%. However, the analyst’s growth is modeled off a lower base in 2016, so unit views diverge.
- Handset industry outlook – Long’s long-term view for the handset industry remains bleak, though comparing off a weak 2016 (handset industry revenue had a big reset in 2016 and was down 4.3%) means long-term growth rates go up slightly. The analyst models handset units to grow at a 0.7% CAGR from 2016 to 2020, with smartphones growing at 2.5%. The analyst believes emerging markets will dominate smartphone growth, at 3.3%, while developed markets will grow less than 1%. Long models handset ASP to grow 0.5%, with smartphone ASP declining 1.0%, but the mix shift helping to keep average handset prices relatively steady.
In closing, Long reiterated an Outperform rating on shares of Apple with a $142 price target, while maintaining a Perform rating and $60 price target on shares of Qualcomm.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Tim Long has a yearly average return of 9.5% and a 64% success rate. Long has a 26.2% average return when recommending AAPL, but loses 8.4% when recommending QCOM. Long is ranked #406 out of 4430 analysts.