Apple Users Around The World Are 'Remarkably Similar'

Apple Inc. AAPL users around the world are "remarkably similar"' according to a Credit Suisse annual emerging market (EM) consumer survey.

"Positively and surprisingly, we find that many EM users exhibit the same purchasing behavior, in terms of rates of replacement and loyalty. Given far lower EM penetration for Apple, we remain of the view that this is a potential source of growth," analyst Kulbinder Garcha wrote in a note to clients.

Here are the five key conclusions from the CS EM survey:

• 1. "Apple penetration in EM remains low at <30 percent, overall.
• 2. "Lower price and local support are key drivers for EM penetration, which is being addressed with retail expansion and the iPhone SE.
• 3. "EM replacement rate for iPhones is about 2.9 years, close to global average.
• 4. "Apple EM users have 2.0 Apple products, on a population weighted average, driving multi-compute advantage and high retention levels.
• 5. "Apple users are about 50 percent more affluent versus non Apple users."

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"The significant potential ahead in EM penetration, and the scope to capture as many as 127 million users away from Android in EM alone keeps our conviction that units could exceed our projections," Garcha said.

Emerging Markets' Potential

"Also, the multi compute users in EM should keep retention rates high at >90 percent. Additionally, the sub 3 years replacement cycle in EM suggests that our global average of 30 months is a decent estimate. All of this increases our conviction in our proprietary iPhone installed base model, which shows volume recovery from ~220 million in 2016 to 247 million in 2017, and 250 million long term," Garcha added.

"What is also interesting is that this confirms our long held view that Apple has been building presence in one country at a time through retail stores. By contrast, India, South Africa and Indonesia, where Apple has no retail stores, have noticeably lower Apple penetration. This again provides corroborating evidence that significant potential exists in this region as Apple builds its distribution channel in those countries."

India

The analyst noted Apple has key room to grow in India saying "an average penetration rate of 27 percent but noticeably low in India."

Specifically within India, the analyst highlighted Apple's plans to build retail stores and boost sales momentum, as indicated during various conference calls.

China

On China, the analyst said "success story in China could be replicated over time. We note the impact of retail stores being opened on the reported regional revenues. Indeed, over the period that Apple added 28 stores (by end of Dec. 2015), we note revenues grew 27 fold to ~$18 billion in F1Q16."

Shares of Apple closed Thursday's trading at $108.99. Credit Suisse has a Outperform rating and $140 target price on the stock.

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