Apple Inc. (AAPL): Bumpy Ride Ahead or All Roads Clear for iPhone Launch?

Does Apple Inc. (NASDAQ:AAPL) heading into its iPhone 8 launch full steam ahead, or is the tech titan on the brink of a smartphone growth slowdown? Analysts are weighing in, from stances rooted in skepticism as to whether consumers will spring for the latest-and-greatest new smartphone model to a perspective of unfazed conviction on the forthcoming fall release.

Barclays analyst Mark Moskowitz enters the debate from the sidelines, wary that the giant is at a point where there simply is “not as much juice left” as it veers from a path of “peak valuation.” As such, fearing that the iPhone 8 will come up short of high anticipation, the analyst reiterates an Equal Weight on shares of AAPL with a $123 price target, which represents a just under 15% downside from where the stock is currently trading.

“Our concern is that Apple’s P/E recently has been close to 14.4x consensus C2018 EPS estimates,” the analyst underscores, “which is near the peak valuation levels of the iPhone 6 cycle (14.9x).” When a giant is at the top, there is always room to fall, meaning, “This could mean a bumpy ride lower if the stock drifts back to its 3-year P/E average of 12.2x if prospects of a mega cycle diminish later this year,” asserts Moskowitz.

The analyst sees the heyday of the smartphone market momentum is no longer on the rise these days, pointing out, “Premium smartphone growth is stagnating. Based on data from IDC, global revenue for the premium segment of the smartphone market declined (13%) Y/Y (TTM) in Mar-Q. As a percentage of global smartphone revenue, the premium segment declined to 29% of total, down from 33% in Mar-Q 2016 (TTM). Our concern is that as innovation in the smartphone market wanes, users may be less willing to pay a meaningful premium for the latest smartphone, especially when ‘must-have’ features are lacking.”

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Mark Moskowitz is ranked #200 out of 4,569 analysts. Moskowitz has a 66% success rate and realizes 14.7% in his annual returns. When recommending AAPL, Moskowitz garners 26.6% in average profits on the stock.

Conversely, Cowen analyst Timothy Arcuri argues in favor of the tech giant, believing that based on a strong fiscal third quarter print from key AAPL supplier, contract electronics manufacturer Jabil Circuit, who delivered a beat on revenue guidance for the fiscal fourth quarter, this is a solid set-up for Apple’s upcoming release. Finding “commentary indicates no glaring issues for the iPhone launch,” the analyst casts his bullish take on Apple, noting that supplier results are pivotal in preview of the launch.

In reaction, analyst reiterates an Outperform rating on AAPL with a price target of $160, which represents a close to 11% increase from current levels.

Ultimately, “Our own field work suggests total iPhone supply for CQ2 remains unchanged at ~43MM units. We model sell-in of ~41.5MM (up slightly Y/Y) and sell-through could be flat to just down slightly even considering the huge ~4MM unit channel inventory draw-down in CQ2:16. iPhone ASP should also be fine as we now see something in the ~$590 range (roughly flat Y/Y). Overall, we see little surprises to AAPL’s CQ2 and think Street numbers are fine ($44.9B/$1.57). JBL’s AugQ guide for DMS of +26% Y/Y (+22% Q/ Q) and implied outlook for mobility to us supports a constructive view for iPhone units in AAPL’s SeptQ, though we are still $1.0B/$0.09 lower than Street as initial read on Sept iPhone supply – which still does not include any OLED units – is ~3-4MM units below what is implied by Street. While notable for traders, this just means more of the ‘powder keg’ pushes to CQ4 (we model 90MM iPhone units),” contends Arcuri.

Timothy Arcuri has a very good TipRanks score with a 64% success rate and a high ranking of #112 out of 4,569 analysts. Arcuri yields 19.9% in his yearly returns. When rating AAPL, Arcuri gains 26.6% in average profits on the stock.

TipRanks analytics demonstrate AAPL as a Strong Buy. Out of 32 analysts polled by TipRanks in the last 3 months, 26 are bullish on Apple stock while 6 remain sidelined. With a return potential of nearly 14%, the stock’s consensus target price stands at $163.96.

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