Meet Apple Inc.’s (AAPL) New Skeptic

Wells Fargo's Aaron Rakers sees 14% upside potential for AAPL stock, but spotlights volatility down the line.


What does Apple Inc. (NASDAQ:AAPL) have going on aside from its iPhone buzz? Bulls would argue for the ultimate tech empire that has had a massive showcase in the market through 2017, yet one new voice on the tech titan introduces some uncertainty in his opening coverage.

Wells Fargo analyst Aaron Rakers is out with new insights from the sidelines, with eyes peeled to expected volatility lying ahead. While the analyst commends the big Apple’s ecosystem, he also wonders if the company will ever satisfy investors completely with its innovative upgrades compared to rivals who are offer smartphones for better prices.

As such, the analyst initiates coverage on Apple stock with a Market Perform rating with a $195 price target, which represents a 14% increase from current levels. (To watch Rakers’ track record, click here)

Rakers explains, “We believe strength in shares of Apple have, in part, been driven by a ‘chase-the-performance’ trade ahead of the iPhone 8/X product cycle,” with the iPhone 8 having just launched September 22nd and the iPhone X now out for almost two weeks.

“We think the shares could now see increased volatility, with a focus on incremental derivative demand and mix data points over the coming months,” adds the analyst, who likewise expresses concern that “given the tight memory supply/demand dynamics, Apple’s results could be negatively affected by lack of supply or higher-than-expected prices.”

In a nutshell, Raker’s cautious stance boils down to a “what’s next” question: “While we applaud Apple’s execution and continual ecosystem buildout, the inevitable shift to what’s next should once again surface post the iPhone 8/X cycle.”

Competition is fierce and even loyal Apple enthusiasts have cause to be left with more queries down the line. “We expect some investors to continually question Apple’s rate of innovation (focus on Apple’s significant R&D investments) for the iPhone as competitors offer similar features and cheaper smartphones,” Raker surmises.

The Wells Fargo analyst’s sidelined take is the minority amid a Street that belongs largely to the bulls on the tech leader, with TipRanks analytics demonstrating AAPL as a Strong Buy. Out of 31 analysts polled by TipRanks in the last 3 months, 25 are bullish on Apple stock while 6 remain sidelined. With a return potential of nearly 11%, the stock’s consensus target price stands at $187.30.

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