What Happened To Apple's iPhone 'Supercycle?'

Apple Inc. AAPL has long thrived on supercycles — periods of heightened unit sales as consumers upgrade to next-generation products.

But some research suggests a dampening of the iPhone cycle as Apple customers retain older models, ultimately forcing review of Apple’s earnings strategy.

The Rating

UBS analyst Steven Milunovich reiterated a Buy rating on Apple with a $190 price target.

The Thesis

Despite anticipated deceleration in the U.S. and Europe, iPhone sales should pick up in China and emerging markets in 2018, yielding “not a ‘supercycle’ but a solid year,” Milunovich said. (See Milunovich's track record here.)

UBS forecasts an ever-muted cycle, with Apple's 2018 upside driven primarily by higher average selling price compounded by 10-percent growth, rather than the previously expected 12-percent figure.

“The stock narrative should shift from iPhone cycles to iPhone annuity — how does Apple monetize the installed base through additional products and services?” the analyst said.