Apple stock tumbled below $100 per share immediately following the company’s earnings report last month and now appears to be holding steady in the lower $90 per share range. At this point investors are looking for the bottom and considering when might be a good time to get into (or back into) Apple stock.

Apple Stock Oversold, "Healthy Bounce" Coming Soon: RBC

What bears are saying about Apple stock

In a report dated May 8, RBC Capital Markets analyst Amit Daryanani and team said investor sentiment on the iPhone maker is currently skewed toward the negative, but they believe its stock is oversold. Shares have plunged 11% since the company’s April 26 earnings report, compared to the S&P 500’s 2% decline in the same timeframe. The RBC team said investors are becoming more interested now in Apple stock since the price has come down, but they’re trying to gauge whether it’s close to a bottom.

Perhaps the key arguments against Apple are those dealing with the iPhone. There have been concerns that replacement cycles are growing longer and longer for quite some time. And then there’s the weakness of the iPhone 6s, which caused the company to report its first ever unit decline in the March quarter. Perhaps worse than this are the reports that the iPhone 7 won’t be very different than the iPhone 6s.

Another big bearish argument the RBC team gives for Apple stock is China, which shifted from being the tailwind it was is for about four or five quarters to being a headwind in the March quarter as sales plunged year over year in the region. Further, some investors are concerned that the company’s margins have peaked, and management implied even more downside going forward in their guidance. Daryanani and team also report that some investors are concerned that the practice of doing share repurchases by raising debt is unsustainable. Further, much of Apple’s cash is trapped overseas, which makes the company’s valuation even less attractive.

What bulls are saying about Apple stock

The RBC team said Apple bulls expect iPhone growth to accelerate in the long term and the replacement cycle to smooth out this year and next, especially if the company releases a phone with an OLED display, as rumors have suggested. Bulls also see services as providing a solid base for revenues going forward as they were 12% of total revenues in the March quarter, and they expect services to see growth in the double digits and be accretive to margins.

Further, the U.S. dollar should finally begin to weaken, which should make currencies become a tailwind to revenues and margins. Also Apple stock trades at less than seven times free cash flow, which bulls say is attractive and “close to historical trough valuations,” said the RBC team. Bulls also believe the current setup is similar to what we saw in 2013 with the iPhone 5s and 5c cycle as sentiment got extremely bearish then, but then the iPhone 6 proved to be a massive success.

Apple stock poised for a rally

Daryanani and team note that Apple’s valuation is currently within 10% of the 2013 troughs, so they believe it will rally soon, but only in the $90 to $110 range. They add that iPhone cycles will likely keep growing longer and “keep a lid on revenue/EPS growth for AAPL till we get an innovative iPhone iteration.”

However, they believe that in fiscal 2017, the iPhone 7 will at least drive stable, mid-single digit growth in units. They have an Outperform rating and $120 per share price target on Apple stock.