Merrill Lynch asks: How sticky is Apple?

Pretty darn sticky and getting more so, according to a survey of 91,000 smartphone owners in the U.S., U.K, China and India.

Three charts from a note to clients by Wamsi Mohan that landed on my desktop Tuesday:

iPhone owners display stickiness with the next upgrade: 70% of current iPhone owners noted they intend to buy an iPhone with their next upgrade, slightly higher than the 69% cumulative result from the March-July data in the latest iteration of this report. Apple stickiness remains dominant, significantly above key competitors Samsung (stable at 53%), Huawei (53% from 54%), and Xiaomi (stable at 37%).

Click to enlarge. 

Survey implies iPhone interest rising: Interest in upgrading to an iPhone is rising, with interest peaking in September following the announcement of the new iPhone Xs, Xs Max, and Xr. The most recent data available suggests 33% of all survey respondents intend on purchasing an iPhone the next time they upgrade, compared with Samsung, the second highest, at 15% (see chart 2).

sticky apple

Material room for growth in emerging markets: Our survey points to a significant opportunity for growth in both China and India. Although the upgrade intentions remain strong in India, the replacement is skewed toward lower end phones. 33% of respondents in India intend to upgrade in 2018 vs. 21% in China and the US, and 19% in the UK. In our view, Apple continues to have strong potential in China and India over the long term.

sticky appleMaintains Buy rating and $256 price target.

My take: No huge surprises here, but it's rare to have analysts' opinions backed up by so much data. Mohan says Bank of American/Merrill Lynch gathered an average of 490 responses per day. This is where national banks have an edge over boutique investment firms.


  1. Fred Stein said:
    Interesting and encouraging to see. Not surprising Huawei and Samsung are closest behind Apple. Google by contrast is in a tough spot with tiny market share and low customer loyalty.

    October 9, 2018
    • Gregg Thurman said:
      I remember when Steve Jobs first announced the iPhone back in 2007. He said that he would consider the iPhone a success if it only garnered about 1% (world) market share. At that time 1% would have amounted to about 10,000,000 units. Of the markets shown above it would appear that Google has ~3% aggregate share.

      The difference between now and then is that iPhone ASP exceeds $800 while the Google handset has a $350 ASP (if that).

      October 9, 2018
  2. Robert Paul Leitao said:
    Apple’s economic moat is widening and the barriers to competition are rising by the minute. By-and-large, analysts that see beyond iPhone unit sales and incorporate fast-growing Services and Other Products revenue into their models will have higher price targets than analysts that value the company almost exclusively on iPhone sales alone. Analysts can no longer deny the “stickiness” of Apple’s product and services paradigm.

    Apple does make the world’s best smartphone handsets. Apple also has the pricing power in the market to offer the handsets as a value proposition while generating the revenue to fund ongoing innovation and technology development. Because Apple creates both the handsets and the ecosystem the company is able to offer a far superior experience for consumers. The experience, however, is influenced by fully integrated services and constituent products such as the Apple Watch and AirPods, etc.

    The value of Apple’s services is far greater than what is reported for revenue in the Services segment. The value includes the services offered at no cost to consumers such as iMessage and the Photos app.

    In my view, the revenue generated by the Services segment warrants a premium valuation on a dollar-for-dollar basis to the revenue from device sales. The services offered by Apple at no cost are reflected in Apple’s handset pricing power in the marketplace.

    Apple’s widening economic moat can no longer be contested. In my view, the only surprise in the Merrill report is that it wasn’t inclusive of yet another price target increase.

    October 10, 2018

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