All eyes are on Apple.
Morgan Stanley analyst Katy Huberty says this event should launch Apple into a so-called supercycle – with China fueling much of that growth.
Business Insider spoke to Huberty about all things Apple, including her $183 price target for Apple’s stock – 14% above the stock’s current price and $10 higher than Wall Street consensus, according to Bloomberg.
She says Wall Street fundamentally misunderstands the Chinese market. Her models predict a 23% growth in iPhone sales over the next fiscal year – much higher than the 13% projected across the rest of Wall Street – thanks to strength in the Chinese market.
Here’s what she had to say (emphasis added):
On Chinese consumers:
“China is misunderstood by the market. If you look at Apple’s results over the past year, China is a disappointing region. The investment community dialogue around that is that Apple may be losing its edge to local Chinese-branded smartphone makers like Vivo or Lenovo. We absolutely do not think that’s the case.”
“Macs are growing double digits, iPads are growing double digits, services are growing double digits, but iPhone is not growing. It’s highly unlikely that Chinese consumers are paying $2000 for a Mac at home, but carrying a cheaper smartphone device with them. More likely, the explanation is that Apple’s retail system is alive and well. High-end Chinese users want to buy Apple products, but the iPhone has not had a form factor change for three years. We believe that Chinese consumers are just waiting for that change.
“Year-old iPhones in China grew 56% this year and yet iPhone sales are declining, that gives you a sense of how much pent up demand there is on the back of this new iPhone that is launching in September.
On reading the wrong data:
“Wall Street looks at shipment data, and if you look at that data set, you’ll see that local Chinese companies are taking share. We think that data is misleading. If a company ships products into a channel somewhere, even if that phone isn’t purchased and activated, it still counts as a shipment. You’ve seen weakness at a number of semiconductor companies that sell into those cheaper brands, and their business has been very weak because there’s inventory in the system.
“The quality of those devices are not as good as an iPhone, and therefore they don’t last as long. They tend to get upgraded every 18 months whereas an iPhone tends to get upgraded every two to three years. What that means is you have to sell a lot more of them to have the same market share of the installed base. The shipment data is misleading. Wall Street looks at that and says that Apple is losing its edge, the reality is that there’s a situation of pent up demand.
On Chinese competitors:
“In China and other emerging markets, there’s more diversity because there’s higher price sensitivity and larger low-end markets. It feels like every year or two there’s a new winner in China, a company that grows really fast, that doubles shipments, that takes share, and then a year or two later they start to decline and another one emerges. We haven’t seen yet in China any significant staying power for those local brands. Of those four – Vivo, Opo, Xiaomi, and Huawei – Huawei has had the most staying power, but recently hasn’t had as much growth as Vivo or Lenovo.