Why Apple Is Gene Munster's Top Large-Cap Pick Heading Into 2016

Piper Jaffray analyst Gene Munster has made a very familiar pick as his top large-cap name to own for the rest of 2015. In a new report, Munster explained why Apple is the top stock to own right now.

Holiday Season

The first catalyst Munster sees ahead for Apple is the holiday shopping season. He predicts that the combination Apple Watch, Apple TV and iPad Pro holiday sales will propel Apple’s Q4 revenue to the top of its guided range.

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Annual Upgrades

Piper Jaffray expects that the iPhone upgrade cycle will be shortening in coming years, meaning higher turnover for Apple. “We expect the upgrade cycle in the U.S. to shorten from around 22 months to 15 months based on our assumption that 75 percent of U.S. iPhone consumers become annual upgraders by the end of 2018, from about 10 percent today,” Munster explained.

He added that the contracting upgrade cycle could provide an average annual tailwind of 10 percent to iPhone units in the next three years.

iPhone 7

Finally, while the coming iPhone 7 cycle is still nearly a year away and already highly anticipated, Munster believes that it could be a particularly strong cycle due to the potential for major re-design. According to the report, Piper Jaffray sees the potential for 3D Touch to render the iPhone’s home button obsolete, meaning that Apple could choose to expand the iPhone 7’s screen and/or make the device smaller.

Munster believes there is a 50/50 chance that the iPhone 7 will not have a home button.

Outlook

Munster has long been an Apple bull, but his latest bullish predictions are particularly lofty for Apple shareholders. Piper Jaffray maintains its Overweight rating on Apple and its $172 target for the stock.

Disclosure: The author holds no position in the stocks mentioned.

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