UBS analyst Steve Milunovich has reiterated his Buy rating on Apple shares though he has cut his twelve-month price target. Barron’s says that’s dropped from $120 to $115. The issue is iPhones, and that he can’t exactly what’s going to happen with them.

While Apple has its installment plan that lets people upgrade their phones annually, most people buy their phones through carriers, not Apple.

Quoting the Milunovich note:

There are different plans, but AT&T is seeing its 30-month plan as most popular. The iPhone Upgrade Program from Apple with the option to get a new phone annually works in the opposite direction but likely will constitute a small percentage of sales.

While he does expect a serious return to upgrades for existing customers, he’s not sure whether that happens in fiscal year 2017 which begins this October, or fiscal year 2018 which begins about a year and a half from now. He seems to be leaning towards this Fall though. Quoting his note:

Our base case scenario assumes moderate lengthening of the upgrade cycle as financing plans encourage some to stick with their current phone, but the iPhone brand still drives sizable upgrades in F17.

Source: Barrons Blog

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