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Needham: All Will Be Well For Apple Eventually, After iPhone Users Upgrade

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Laura Martin of Needham recommends investors to buy weakness in Apple Inc. AAPL 6.45% shares as the scenario would change after users start to upgrade their iPhones.

The analyst expects upside in the second half of 2016 and noted tough year-over-year iPhone comps, currency headwinds, and $2 billion inventory drawdown as "temporary issues."

"[A]ll those iPhone buyers will eventually upgrade their iPhones as our work shows an 8 years average holding period inside the AAPL ecosystem," Martin wrote in a note.

The analyst, who has a Strong Buy on Apple shares, is betting on increasing android conversion rates and growth in services revenue, which grew 20 percent to $5.99 billion in the second quarter.

Following the second quarter results, the analyst cut his third quarter revenue forecast by 12 percent to $43.34 billion and EPS view by 21 percent to $1.43.

The analyst also cut FY16 revenue estimate by 4 percent to $220.7 billion and EPS forecast by 7 percent to $8.48.

Apple shares were down 6.05 percent to $98.03, while Martin has a price target of $150.

DateFirmActionFromTo
Apr 2016Brean CapitalMaintainsBuy
Apr 2016BarclaysMaintainsOverweight
Apr 2016CitigroupMaintainsBuy

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