There’s nothing worse than a bad apple.
That’s what investors are saying about Apple’s (AAPL) stock over the past two months. Shares have plummeted more than 30% since the stock hit an all-time high in October, as investors have fled the stock over worries about iPhone sales, general product pricing and trade fears.
Making matters worse, a Chinese court recently banned the sale of some iPhones after Qualcomm asked for an injunction in its patent-infringement case. While Apple has updated its software to comply with the terms, it seems to be a step back for the company in its ongoing licensing battle against Qualcomm.
Needham analyst Laura Martin has also taken a step back with her take on Apple; while she maintains her Buy rating, she has decreased her price target from $260 to $200.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Laura Martin has a yearly average return of 17% and a 59% success rate. Martin has a 27.3% average return when recommending AAPL, and is ranked #94 out of 5,107 analysts.
After Apple decided to stop publishing unit sales – a move that irked some investors and analysts –Martin supports the decision, saying that providing such information “tethers [Apple’s] valuation to its hardware roots of the past, not the future.” The analyst says that Apple is an “’ecosystem company’ and that valuation should be based on…a) unique user growth; b) trends in churn rates…and c) trends in lifetime revenue per user.”
Martin says that “Wall Street will ultimately value AAPL on its 1.4B active devices and the value of these over time,” rather than how many iPhones it sells in each quarter. The analyst is focusing more on Apple retaining its customers and generating revenue through services, rather than new product sales; subscription revenue “represents an annuity stream revenue for AAPL that should be valued at a higher multiple than hardware revenue.” Finally, the analyst points to services revenue having higher margins than hardware, which “drives upside to the lifetime value per user.”
Overall, the troubled iPhone maker certainly has the Street divided. Based on 31 analysts polled in the last 3 months, 16 are bullish on Apple stock, while 15 remain sidelined. The 12-month average price target stands at $220.79, marking a nearly 40% upside from where the stock is currently trading. (See AAPL’s price targets and analyst ratings on TipRanks)