It’s been a rough go for Apple (AAPL) since the start of the new year. Shares plummeted after management warned that revenue growth would suffer and is going to come in significantly lower than investors had predicted. However, Wedbush analyst Daniel Ives says now that the dust has settled investors will be focused on March guidance as the key swing factor for share price in the near term.
While many blame the drop in revenue on weak demand from China, Ives has a different approach:
“Taking a step back, US/China tensions have not helped Apple’s demand story in the field for its latest iPhone XS/XR product cycle, but to be crystal clear, we believe the primary driver of Apple’s demand doldrums come down to a mispriced smartphone with XR as the culprit in China and elongated upgrade activity within its installed base a clear headwind,” Ives explains.
“We continue to believe the services business, poised to exceed $50 billion in FY20, will be the ultimate driver for the next phase of the Apple growth story set to take hold over the coming years with 190 million to 200 million iPhones shipping in both FY19 and FY20 based on our new estimates. In a nutshell, better execution, a more innovative product strategy, larger M&A around content/more services, and losing pricing hubris (e.g., $750 XR device) will need to take place in Cupertino with Cook’s chess moves over the coming months laying the groundwork to help get Apple out of its darkest chapter in the modern iPhone era,” the analyst concluded.
All in all, Ives is bullish on the stock with an Outperform rating and price target of $200, showing a 32% potential upside. (To watch Ives’s track record, click here)
Wall Street is entirely split when it comes to how to proceed with Apple. What once seemed like a sure bet is now less certain. Out of 36 analysts, 18 are bullish and 18 are sidelined. The consensus price target of $178.57 shows a potential upside of nearly 18%. (See AAPL’s price targets and analyst ratings on TipRanks)