From a note to Wedbush clients that landed on my desktop Sunday:
The main event for Apple is on deck for Tuesday when Cook & Co. launch the iPhone 13 in a virtual format which we expect will continue the all-important supercycle iPhone upgrade cycle well into 2022.
Taking a step back, Apple remains in the midst of its strongest overall product cycle in roughly a decade… Asia supply chain builds for iPhone 13 are currently still in the ~90 million unit range compared to our initial iPhone 12 reads at 80 million units (pre-COVID) and represents a ~10%+ increase YoY out of the gates.
From a spec perspective, we have increased confidence that iPhone 13 will have an eye-popping 1 terabyte storage option, which is double from the highest Pro storage capacity today (512GB) and will also include a number of key enhancements with Lidar across all iPhone 13 models…
In a nutshell on the iPhone front, we believe the robust consumer product cycle continues globally for Cook & Co. especially with today roughly 250 million of the current 975 million iPhones not upgrading their smartphones in over 3.5 years based on our analysis, speaking to massive pent up demand within Apple’s installed base.
Regulatory pressures look containable for now… We estimate in a worst case scenario that Apple would lose roughly 3% of total revenues (4% of EPS) from this App Store change to gaming publishers and likely this will be closer to a ~1% revenue and EPS headwind the next few years given we believe the vast majority of consumers will continue to use the App Store for in-app purchases.
Maintains Outperform rating and (Street high) $185 price target.
My take: He’s right about what the vast majority of consumers will do.
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