"On our proprietary smartphone scorecard, we judge strengths and weaknesses for major smartphone vendors across 9 factors, ranging from software/services to intellectual property rights," he writes in a research note. "Across these metrics, we rank Apple first and conclude that even 5 years after the launch of first iPhone, few vendors come close in comprehensively closing this gap. After capturing 19% smartphone share in 2011, we believe Apple can expand share to 23% in 2012/2013, aided by distribution-led growth, a leading software/services platform and innovation on hardware."
Garcha adds that in a multi-device world, "Apple is materially advantaged versus peers as its vertically integrated structure allows it to simultaneously address all three aspects of the compute market - PCs, tablets and smartphones - effectively driving a virtuous circle of competitiveness."
He adds that "much of the innovation comes in software, enhanced by a broad range of "i services" which are hard to replicate."
The analyst contends Apple's share of the overall compute sector - PC, tablets and smartphones - is now 17%, but longer-term can reach 27%. "To maximize this, we retain our view that the company will need to launch a lower end iPhone," he contends.
Garcha adds that the stock even after the recent run trades at a 12% discount to large cap tech overall despite higher EPS growth, better cash distribution and the company's new dividend policy.
AAPL is up $2.55, or 0.4%, to $628.75.
