"We expect that the combination of a solid if not supercycle iPhone year, the prospect for accelerated share repurchase with repatriated cash and a reasonable valuation should make for further, albeit more modest, outperformance," said UBS analysts in a note on Wednesday, Jan. 3.
Sure, supply chain and survey inputs have pointed to mixed outcomes for the iPhone X, iPhone 8 and interest from consumers in China. But, according to UBS, those stats matter far less than demand specs do.
UBS said iPhone sales growth in the U.S. and Western Europe could slow in 2018 from gains of roughly 11% last year. But "substantial improvement" in mainland China and penetration in emerging markets could mean double-digit growth.
What's more, a combination of 15% growth in average selling prices and 10% unit growth suggests Apple could enjoy a 25% iPhone revenue jump.
So what does Apple have to worry about?
"We think what's next is Apple figuring out how to monetize its stable user base through additional hardware and services," UBS wrote. "Particularly intriguing is management's comment that the vast majority of customers do not purchase services and the company's intent to introduce more services in coming years."
Investors could finally move beyond the iPhone to focus on Apple's other products and services as bellwethers of the company's success or failure.
"Apple management views the iPhone as an annuity given a growing installed base and high retention rate," UBS said. The next bug hurdle is finding a means of monetizing the base of about 700 million iPhone and 1 billion total Apple users.
Services sold through Apple's iOS could play a major role in that development, according to UBS. Apple has said that once it can get users to buy services their spending increases. The company also plans to introduce new services on iOS that could draw in more users.
"Beyond video, it's unclear what these services will be though we think health, leveraging the Watch, is a great opportunity," analysts noted. "Ideally Apple would create a services platform that sits between consumers owning their health data and providers."
But it's important to remember that Apple, even with its challenges that lie ahead, is still an attractive stock.
"iPad has bottomed, Other Products will be aided by Apple Watch, AirPods and HomePods, and services could grow nearly 20%," UBS noted. "The gross margin should be flattish and expenses up less than revenue."
Apple gained 0.6% to $173.31 on Wednesday. Shares are up nearly 49% in the last 12 months.
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