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. 

Price Action

At the time of publication, shares were trading marginally lower off the open at $174.64.

Related Links:

Even If You Expect An iPhone ‘Super Cycle,’ Has Apple Stock Just Gotten Too Expensive?

Analysis: Even An iPhone Super Cycle Doesn’t Make Apple Shares A Buy At These Levels

Here's Why Apple Will Be Worth $1 Trillion By The End Of 2017

Photo courtesy of Apple.