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  • Writer's pictureGVA Research

Nightly Business Report: David Garrity Interviewed on AAPL FY15Q2 Results

AAPL – iPhone6 Upgrade Cycle In 1Q15 Bolstered By PRC Lunar New Year, Look For Shipments To Reach 58mm With iPhone6+ Mix Driving Margins Higher: 

Note that demand for the iPhone6+ catapulted AAPL to be #1 in CY4Q14 handset shipments in PRC. With the Chinese New Year holiday, we expect AAPL extended its PRC leadership into CY1Q15, especially given that the company’s alliance with China Mobile has only just reached its 1-year anniversary. In broader terms, the iPhone6 upgrade cycle may be expected to boost the current iPhone installed user base of 404mm to 650mm by 2018, a penetration that will represent only 33% of the estimated 1.82bn premium smartphone subscribers. Meanwhile, the popularity of the higher margin iPhone6+ is expected to drive gross margin expansion.

AAPL – Apple Watch – Expect 15mm Units Sales in FY15: 

While still early in its launch cycle, indications that AAPL’s supply chain is gearing up to meet initial demand of 20mm units bodes wll for demand over the balance of FY15. We look for 15mm units to be sold to customers over the balance of this fiscal year.

AAPL – Risks To Continued Stock Appreciation Few To Be Seen: 

At present, AAPL shares continue to show signs of being well-positioned to deliver continued steady appreciation. Product portfolio is broadening in a profitable manner, share of product end markets still remains relatively low, and the prospect of expanding into large and significant new markets exists (i.e. Apple Auto). While AAPL is the single largest market cap company globally, the company enjoys a significant role as one of the leading companies in the technology platform that will drive global economic growth over the next decade, namely the continued deployment of internet-enables smart devices. As long as AAPL sustains its leadership position, we expect the shares to provide investors with a core long-term holding.

AAPL – iPhone6 Upgrade Cycle & Apple Watch Launch Should Sustain Growth Rate & Bolster Valuation: 

With AAPL presently enjoying positive product cycle dynamics across its portfolio, investors should be encouraged that management’s ability to build the company beyond the iPhone offering is be affirmed. As investors discount the emergence of a more balanced growth company, valuation can expand from the current price-to-earnings-growth (PEG) multiple of 0.74x to 1.0x, which would result in a share price of $180, a 36% upside to the stock from the current $132.65.

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