B of A Securities analyst Wamsi Mohan maintained Apple Inc (NASDAQ: AAPL) with a Buy rating and a $230 price target.
Mohan flagged that the global iPhone installed base (IB) was about 1.2 billion units at the end of 2023.
The used iPhone IB has been growing faster than the new iPhone IB, albeit off a smaller base (2017-22 CAGR of 16% vs. 3%), and he expects the higher growth rate to continue (2022-26E CAGR of 15% vs. 2%).
According to the analyst, a larger IB can eventually drive higher service consumption and sales of incremental devices (halo effect).
The iPhone IB in the Rest Of The World has been growing faster than in other regions, and given the Emerging Markets opportunity, he expects that to continue.
Mohan noted the IB as a critical indicator of the potential of Apple's ecosystem. The overall IB has grown to over 2.2 billion units.
With the advent of Apple Intelligence, Mohan noted replacement cycles shrinking, creating a more vital replacement dynamic.
For calendar years 2025 and 2026, Mohan noted consensus iPhone units of 241 million and 238 million as too low (vs. his arguably conservative estimates of 247 million and 257 million) given his analysis suggests 230 million and 241 million units from replacement cycle dynamics alone, not accounting for significantly increased switching activity.
With a total IB size of 2.2 billion devices, that implies less than 50% monetized, which leaves room for significant further penetration of services in the IB, as per the analyst.
As growth migrates to the secondary market, which Mohan noted as more price-conscious consumers, lower initial services attach that should grow over time.
Mohan said Apple has successfully monetized its IB by connecting technologies such as search or developers on the app store to its highly affluent user base.
He noted the potential for Apple to similarly monetize AI by connecting various LLMs with its IB of users. Mohan further noted pricing power on hardware and services as an incremental opportunity.
Price Action: AAPL shares traded higher by 4.01% at $215.45 on the last check Wednesday.