Apple Inc. (NASDAQ:AAPL) continues to perform well in terms of purchase intentions and mindshare, according to analysts at UBS. They surveyed consumers in the U.S., the U.K., Mainland China and Italy last month and have released the results of that survey in a pair of reports dated Nov. 10, 2014.
Apple price target increased
Analysts Steven Milunovich and Gareth Jenkins and their teams report that the smartphone industry as a whole continues to do well. Because of how well Apple fared in their proprietary survey, Milunovich boosted his price target for Apple from $115 to $125 and reiterated his Buy rating on the company’s stock.
He states that the results of the survey improved his confidence in Apple, suggesting that demand for the iPhone 6 could be approximately 190 million units through December 2015. That would be an upside to his estimate of about 170 million units. In addition, he suggests that if Apple’s valuation was closer to that of a subscription business with low churn, the company’s market capitalization could even double.
Jenkins and his team say that they see potential upside to $266 per share for Apple if investors’ views of the company shift toward that of a subscription business.
Apple shines in smartphone survey
According to the UBS teams, buying intentions for Apple’s iPhone 6, especially the iPhone 6 Plus, are strong. Approximately 40% of those who participated in the survey said they are likely to purchase an iPhone 6 within the next year. More than half of the intended purchases were for the iPhone 6 Plus, while 38% of them were for the smaller iPhone 6.
Their model suggests a 2.5 to 1 ratio in favor of the iPhone 6, which means that if the iPhone 6 Plus did better than its smaller counterpart, Apple would enjoy higher average selling prices and earnings. The UBS analysts called demand in China “surprisingly high,” as 29% of the survey respondents said they are likely to purchase the iPhone 6. That’s a higher percentage than all of the other regions.
Consumers think about Apple
Nearly one-third of potential iPhone buyers are currently using phones made by Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), which means that Apple stands to gain significant market share from Samsung. The analysts also say that Apple still has the highest overall retention rate at 84% and double the retention rate of Samsung and Xiaomi in China.
In terms of consumer perception and “net promoter score,” they define Apple as “the most aspirational brand with unique products albeit at high prices.” They added that more than 70% of iPhone 6 buyers say they are somewhat likely to use Apple Pay, which they believe means that Apple has a strong position in consumers’ minds, “the most valuable real estate in the world.”
Jenkins’ team was surprised at how many Apple users said they plan to use Apple Pay and believes that the payment service will drive further retention for the company.