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Apple Entering Post-Supercycle Era, But iPhone Installed Base Still Growing


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Apple’s (AAPL) 11th-generation iPhones haven’t kicked off a supercycle of upgrade activity as many had expected, leaving investors to wonder where the next growth spurt will come from for the consumer electronics giant.

That question is top of mind as Apple holds its annual shareholder meeting at its headquarters in Cupertino, Calif., on Tuesday.

Apple prepared for higher sales of its flagship iPhone X handset than have materialized, Nomura Instinet analyst Jeffrey Kvaal said in a report Tuesday.

“It now seems legitimate to wonder if Apple is entering a post supercycle era,” Kvaal said. He rates Apple stock as neutral, with a price target of 175.

Apple shares were flat, near 162.80, in morning trading on the stock market today.

Kvaal estimates that Apple will sell 226 million iPhones in fiscal 2018, which is below the iPhone 6 cycle of 231 million units despite a user base that is about 50% higher.

People are holding on to their current iPhones for longer periods between upgrades, plus there is a rising number of secondhand phones on the market, Kvaal said.

IBD’S TAKE: Apple stock has an IBD Composite Rating of 73 out of a best-possible 99. For more analysis on Apple, visit the IBD Stock Checkup.

“Despite tame sell-through, we believe Apple’s 1.3 billion active devices estimate includes growth in the active iOS base,” Kvaal said.

The growth in the active user base for Apple iPhones and other iOS devices could lead to services and perhaps the Apple Watch emerging as meaningful drivers for the company by 2020, Kvaal said.

At the company’s annual shareholder meeting, investors likely will press executives for more information on its repatriation of foreign profits and capital return program.

But Apple management likes to keep its cards close to the vest and is unlikely to provide much detail at the event.

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