Bank of America Securities this week raised Apple’s share price target by another 7 percent, according tomedia reports, saying the international rollout of 5G should help apples maintain continued sales of more than 200 million iPhones over the next few years. In a note to clients on Wednesday, BofA Securities analyst Wamsi Mohan said pushing carriers and customers to upgrade to 5G networks — and the launch of the 5G-enabled iPhone 12 — would increase iPhone shipments to 200 million until 2022.
But analysts believe the “major cycles” with the iPhone 6 and iPhone 6 Plus Before shrinking to 212 million units in 2016, the model increased from 169 million in 2014 to 231 million in 2015 – except that the iPhone maker’s 5G cycle will be smoother and sales will be smoother in the 36 months after its launch.
“The introduction of (5G) could add to costs and prices,” Mohan said. Therefore, we should be cautious about 5G as a catalyst, and expect it to have a more stable multi-year upgrade cycle. “
Mohan is currently modeling for Apple, which predicts that iPhone shipments will reach 202 million by 2020, 223.5 million by 2021 and 220 million by 2022.
While the 5G boom will benefit Apple, there are signs that the company will not actually be able to sell a lot of 5G iPhones in its first year on the market, as only 20m units (about 10 per cent of its global iPhone shipments) have 5G features. Still, that’s a big increase from Mohan’s previous forecast of 10 million 5G iPhone shipments by 2020. He attributed the growth in part to Apple’s settlement with Qualcomm, which he said was “a clear indication that Apple wants to have 5G capabilities to compete with Samsung and other suppliers”.
In Mohan’s view, Apple’s acquisition of Intel’s smartphone modem business is a long-term view of 5G, paving the way for a second source of modems beyond Qualcomm’s modems. He added that industry surveys suggest that Apple’s 5G iPhone could be staggered across regions and SKUs, and that the more expensive 5G models could be easier to buy in some developed countries or more valuable markets. As a result, he told clients that he was cautious about 5G’s view and expected a more stable multi-year upgrade cycle.
In addition, there will be considerable differences between the markets, the United States may be the main driver of 5G sales. Mohan estimates that by 2020, Apple will have a 36 per cent share of the US 5G market, selling 5m units, and will eventually increase its market share to 40-50 per cent in the long run.
But things will be different in the Chinese market. China is forecast to be a bad 5G market for Apple. Apple is likely to gain about 15 per cent of the 5G market share, thanks to a relatively late start, behind local rival Huawei and its main rival, Samsung, but Mr Mohan believes apple sits slightly by 2024.
In addition, it is widely believed that 5G will be popular among all smartphone sellers in China at a slower rate than 4G, as operators have eliminated mobile phone subsidies. In 2014, 4G penetration for all equipment manufacturers in China reached 44%, and by 2020, 5G penetration is expected to be only 35%.
Now, BofA has raised its target for Apple’s share price to $290 from $270, saying its new target is based on a 17-fold or $17.40 target for 2021. “We believe that the high-end multiple of this historical range is reasonable, given the large cash balance and access to new end markets, the increased mix and diversification of services and the cycle lows of iPhone sales,” Mohan said. “
In addition, the company’s new targets are based on two possible scenarios: low-digit hardware revenue growth and high double-digit service growth, and flat hardware revenue and a slowdown in service revenue to a level of more than a dozen percent. Either way, the inference is that the hardware business remains stable and services will be the main driver of overall revenue growth.