People try out the new iPhone 12 smartphones at an Apple store in Shanghai.
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Apple is now more than six months into the iPhone 12 era, and demand for the company’s first 5G handset lineup remains remarkably strong.
In a research note Thursday, UBS analyst David Vogt notes that a survey of more than 7,000 smartphone users in the U.S., U.K., China, Germany and Japan found that 22% intend to buy iPhones within the next 12 months, the highest reading in five years.
In addition, iPhone retention rates—the number of people who intend to stay on the platform when they switch phones—reached 86%, the best reading in seven years. Interest in 5G wireless is “modestly improved,” he writes, consistent with Apple’s view that we are in the early days of 5G adoption. As a result, Apple’s (ticker: AAPL) current stock price “does not reflect the stickiness of the Apple ecosystem,” he says.
Vogt adds that every region showed a “solid” year-over-year increase in iPhone purchase intent, other than China, which was flat. He sees iPhone units sales of 225 million in the September 2021 fiscal year, and 220 million for fiscal 2022, consistent with overall buy-side estimates.
The UBS analyst also stresses that strong iPhone demand has spillover effects on other Apple products and services. The survey also asked about the Apple Watch. About 37% of respondents said they were likely or somewhat likely to buy a smartwatch over the next 12 months, while 80% were aware of the Apple Watch.
Vogt maintains his Buy rating and $155 price target. He says the target reflects a value for “core” Apple of $141, plus $14 to account for the “probability-weighted” potential for an Apple car.
Apple stock rose 2% to $127.24 in recent Thursday trading. The stock is down about 4% year to date, after an 81% rally in 2020.
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