BofA: Apple Has Room To Grow In Emerging Markets

One of the primary concerns for Apple, Inc. AAPL investors in recent years has been saturation of the global iPhone market, but one analyst said Wednesday that Apple still has plenty of emerging market opportunity. 

The Analyst

Bank of America Merrill Lynch analyst Wamsi Mohan reiterated a Buy rating on Apple with a $225 price target.

The Thesis

A recent survey of 30,000 residents of the U.S., U.K., China and India revealed that Apple has extremely strong loyalty from its existing customers and plenty of avenues for international growth, Mohan said in a note. (See the analyst's track record here.) 

BofA found that Indian residents upgrade their smartphones most frequently, with 48 percent reporting they upgrade every year versus the global average of 2.03 years. Survey results indicate 35 percent of Indian smartphone users are intending to upgrading in 2018 compared to 25 percent in China, 24 percent in the U.S. and 22 percent in the U.K.

“In our view, Apple focusing on India with the rumored iPhone SE2 and local production with Wistron should solidify its growth prospects in the region over time,” Mohan said.

Mohan sees evidence of a major upgrade cycle in the near future, as survey results indicate pent-up demand. That upgrade demand coupled with Apple’s stickiness among existing customers could provide major tailwinds for Apple’s sales numbers, the analyst said. BofA found that 72 percent of iPhone users intend to stay with Apple for their next upgrade, a much higher loyalty rate than any of Apple’s top competitors.

Price Action

Despite iPhone demand concerns, the Apple train has kept rolling in 2018, with shares gaining another 9.9 percent year-to-date. 

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Photo courtesy of Apple.