Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Apple (AAPL) Stock Is Not ‘Out of the Woods’ Quite Yet


Before yesterday’s 7% surge, Apple’s (AAPL) stock had lost more than 35% since the beginning of October. Investors have expressed concern over iPhone sales, product pricing and increased geopolitical uncertainty, including the ongoing trade ware between the US and China. Apple also recently lost two patent cases brought about by Qualcomm (in China and Germany), which further added to worry for the company. Chiam Segel of Elazar Advisors believes Apple has more room to fall.

Segel estimates Apple December-quarter revenue to slow dramatically to 3.1% year-over-year, following five-straight quarters of double-digit growth. He says Apple’s guidance “for the December quarter implied a huge slowdown in revenue growth.” The analyst said he “went through each… [and found] that Apple was not being conservative.”

Segel cites emerging markets, China and the US dollar as reasons for revenue risk He says, “we think emerging markets make up about one-third of Apple’s business. If emerging markets continue to slow that gives us extra reason to believe” revenue may continue slowing.

Segel says the US dollar matters for two reasons: 1) as “a higher dollar lowers their foreign revenues as they translate that foreign currency back into dollars” and 2) a drop in “foreign currencies drop they tend to raise retail prices…[which] also hurts demand.”

On China, Segel says he is concerned that “China was not mentioned as a soft spot in [Apple’s] weak guidance last quarter.” He says, “given the macro slowdown in China I would guess that’s another shoe to drop come this or next quarter. It could be the newest reason for a continued slower revenue growth trend in the coming quarters.” Among other things, there are reports of declining consumer confidence in China, which may contribute to slower growth in the country.

Overall, TipRanks indicates Wall Street is evenly split between the bulls and the fence sitters on the iPhone maker. Out of 32 analysts polled in the last 3 months, 17 are bullish on Apple stock, while 15 remain sidelined. Yet, the 12-month average price target of $218.04 reflects healthy upside potential of nearly 42% from where the stock is currently trading; in other words, optimism circulates among analyst sentiment even amid apprehension. (See AAPL’s price targets and analyst ratings on TipRanks)

 

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