Here's Why Strong iPhone Sales May Drive Demand For Apple Pay & Apple Watch

Canaccord Genuity issued a report on Apple Inc. (NASDAQ: AAPL) after surveys indicated strong demand and high-tier market share gains for the iPhone 6/6 Plus smartphones. Canaccord reiterated Apple as a Buy and raised its price target from $145 to $150.

Analysts Michael Walkley and Siddharth Sinha wrote, "Given our estimate that roughly 15 percent of the iPhone installed base has upgraded to the iPhone 6 devices, we anticipate continued strong replacement sales to existing iPhone consumers for the next several quarters... strong demand and increased mix for the higher memory iPhone SKUs will continue for future iPhone upgrade cycles, driving strong ASP and gross margin trends."

Based on their surveys, Canaccord believes that Apple will grow its iPhone installed base to half a billion during 2015, and this large base bodes well for future strong iPhone replacement sales, earnings and cash flow generation. Long term, strong iPhone sales may drive sales of future iPhone products including Apple pay and Apple Watch along with additional software, services and accessories.

Overall, store traffic due to the popularity of products should further spur demand for Apple's devices.

Shares of Apple closed Thursday at $126.56.