It’s been a rollercoaster year for Apple stock, and investors who owned shares at the beginning of the year have now lost money year to date. The stock is down by nearly 3% for the year as of this writing and continues to slip, bit by bit. While shares are tidily above the 52-week low of $92, they’re significantly lower than the 52-week high of $134.54 per share.
Apple price target trimmed
Apple is now approaching $100 per share, hovering in the lower $107 range for most of Tuesday, and with less than two weeks left in the year, it’s possible that the stock will reach that level. It has already fallen below the bullish support level of $110 per share and doesn’t show signs of climbing back up there in the next couple of weeks.
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In a report dated Dec. 22, Cowen and Company analyst Timothy Arcuri and team said they have trimmed their price target from $135 to $130 per share and maintained their Market Perform rating. They see $100 as a “more compelling price,” calling it their “‘trigger’ price” as investors flee due to the multiple reports about weakness in the iPhone maker’s supply chain.
Earlier signs of supply chain weakness
The Cowen analyst downgraded Apple over the summer based on his survey of Apple’s supply chain, which was already showing signs of weakness as far back as then even though most other firms are only just now admitting to the weakness. He said that for the first time, he found then that builds and units for the iPhone 6s and iPhone 6s Plus indicated a down cycle for the first time.
He said this indicated that Apple was becoming more dependent on lower prices through the sale of price cuts on older models or new less expensive models like the rumored iPhone 6c, which some believe will be unveiled early next year.
No miss expected
Arcuri says he is “apathetic” on iPhone units. He also notes that iPhone units and December quarter builds have been cut by about 5 million units but added that investor expectations for Apple’s guidance for the March quarter might “finally be too bearish.” Despite this cut, he still thinks the December quarter will bring sell-in units of in the low to mid 70 million range and the March quarter will bring units in the low 50 million range.
As a result, he doesn’t expect a “material miss” for either the December quarter or for the March quarter guide, especially because investors are now expecting iPhone units for the March quarter to fall under 50 million. Because of what he thinks are low expectations, there may be the potential to be “tactical – if only slightly – in the near-term” on Apple shares.
No upgrade for Apple yet
Arcuri has not upgraded Apple yet even though the stock is closing in on his preferred entry point of $100. He explained:
“While the stock is closing in our [sic] $100 ‘trigger’ price, the bias to estimates remains to the downside through at least mid-’16 as growth expectations are normalized following the demand pull-ins on 6/6+ and more ‘normalized’ run-rate in China following the simultaneous launch this time around,” the Cowen team wrote.
They do think, however, that the rumored iPhone 6c will offer some support for iPhone units in the June quarter, although they note that the less expensive iPhone model will probably cannibalize the more expensive iPhone 6 and 6 Plus.
“It is simply no longer blasphemous to say iPhone units will likely decline Y/Y in C2016 and expectations for March have come in a lot, but the builds for March are simply too low to make us feel that Street numbers are safe for FQ3:16 (Jun),” Arcuri and team added. “Ergo, the cycle of estimate cuts probably hasn’t flushed itself out yet, making it hard for us to jump back in whole hog.”