FBR 'Sees The Forest Through The Trees' On Apple

In a report published Thursday, FBR & Co. analyst Daniel Ives explored several concerns weighing on Apple Inc. (NASDAQ: AAPL)'s investment sentiment but ultimately made no changes to his bullish Outperform rating and $175 price target.

According to Ives, China macro issues, slowing momentum for the iPhone 6 cycle and "ambiguous" customer adoption levels for the Apple Watch are a major overhang surrounding the company and its stock.

China Growth Concerns

Ives stated that Apple's growth story in China is "still underappreciated" by the Street, as the company's "white-hot momentum" could continue growing in the coming quarters given low penetration levels, growing demand for its App Store, and "massive" cross-sell opportunities for the rest of the Apple ecosystem.

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The analyst also added that even if Apple's market share in China falls to 10 percent in 2018 (from its current approximate 15 percent), the company still faces a $100 billion-plus total addressable market from China smartphone shipments over the next few years.

iPhone 6 Momentum

Commenting on the iPhone 6 cycle, Ives suggested that the device "clearly" made some "large strides" over the past year. The analyst continued that Apple is still in the "middle innings" of grabbing market share across many geographies as only 27 percent of iPhone users have upgraded to the iPhone 6 so far – a dynamic that could continue to play out with the release of an iPhone 6s/6s Plus in the fall.

With that said, the analyst argued that the Street is underestimating Apple's fiscal 2016 topline growth by 300 to 500 basis points with an incremental $1.50 in earnings per share over the next three years.

Jury Is Out On Watch

Finally, Ives argued that "the jury is out" on the entire wearables category, but Apple's powerful brand and loyal consumer base could see consumers moving toward the new technology. As such, there remains a "massive land grab" opportunity with Apple eventually taking a leading share.