Apple Inc. (NASDAQ:AAPL) stock has rallied 26.47% year-to-date. However, Deutsche Bank analysts led by Sherri Scribner believe that the stock has “limited catalysts” going forward. The research firm has downgraded the stock from Buy to Hold, and reduced the price target from $105 to $102. The rally in Apple stock this year was mainly driven by huge expectations from the iPhone 6 and 6 Plus.
New iPad introductions won’t be on par with the iPhone 6 and 6 Plus
The Cupertino company launched two new iPhones last month. The new iPhones have been flying off the shelves with Apple selling over 10 million units in the first weekend. When the company started taking pre-orders in China last week, over two million customers booked the new phones in just six hours. Deutsche Bank says that investor expectations from the iPhone 6 and 6 Plus are very high, making it difficult for the company to outperform expectations over the next two quarters.
Deutsche Bank says the Tim Cook-led company has announced all its anticipated new products of this year, leaving limited catalysts for the stock through the year-end. Though Apple is widely rumored to launch refreshed iPad Air and iPad Mini along with new Macs later this month, the research firm says these product introductions are unlikely to be on par with the iPhone 6 and 6 Plus. Apple Watch has the potential to turn into a money spinner. But the product won’t arrive until 2015.
Deutsche Bank raises EPS estimate for Apple
Market expectations already reflect strong iPhone sales, which led analysts to believe that the stock will remain range bound. Scribner spoke to several investors who said that a large number of iPhone 4S users will drive a strong upgrade cycle. Meanwhile, supply constraints may limit the new iPhone shipments through the year-end.
Anyway, Deutsche Bank has raised its EPS estimates to reflect higher iPhone sales. The research firm now expects Apple’s FY2014 earnings to come in at $6.40, up from the previous estimate of $6.31. Deutsche Bank also revised its FY2015 EPS estimate from $6.80 to $7.50. The current price target of $102 is based on 14x FY2015 EPS estimate.
Apple shares inched up 0.53% to $100.15 at 10:25 AM EDT on Monday.