Apple stock has been moving higher since the report that the company has ordered roughly the same number of iPhone 7 models this year as it ordered last year for the iPhone 6s. Overall, analysts see this as a positive, although at least one firm notes that Apple might scale back the initial order number because it’s still very early. Two others warn that Apple stock is likely to remain range-bound in the near term.
Apple planning for large iPhone 7 cycle
Wall Street has been concerned that the iPhone 7 cycle will be a repeat of the weak iPhone 6s cycle because of the reports that no huge exciting new upgrades are expected. However, analysts are generally expecting a big cycle – whether or not there are any huge upgrades — because it’s the two-year mark from the massive iPhone 6 cycle. Some Apple fans may simply buy a new iPhone because they are eligible for an upgrade.
Taiwanese newspaper the Economic Daily reported on Monday that the company had told suppliers in China to produce between 72 million and 78 million, compared to Wall Street’s expectation for 65 million builds. The newspaper also reported that Apple is planning to release three new models this year: the iPhone 7, 7 Plus, and 7 Pro or Premium.
Apple stock poised for a rally
In a report dated May 23, RBC Capital Markets analyst Amit Daryanani and team said Apple stock is poised for a rally in the near term as the iPhone maker’s valuation sits within 15% of the trough levels observed in 2013. However, they also expect the shares will remain range-bound between $90 and $120, although they believe it will take “an innovative iPhone iteration” for the company to see significant revenue and earnings growth. RBC has an Outperform rating and $120 per share price target on Apple.
UBS analyst Steven Milunovich, who has a Buy rating and $115 per share price target on Apple stock, also believes the shares will be range-bound for now. He sees the current low multiples as providing the floor and the “lack of demand catalysts” as providing the ceiling. He adds that it will be difficult for Apple stock to see more than a bounce right now if estimates fall any further and that it’s looking more and more like we won’t see a “catalyst for more substantial appreciation” until fiscal 2018.
Will Apple reduce build orders?
Bernstein analyst Toni Sacconaghi, Jr. noted in his report dated May 23 that the Economic Times’ report about initial build orders comes earlier in the calendar year than such reports typically come. As a result, he suggests that this could change, and he believes the company “has every incentive to err on the sign [sic] of inflating initial build plan estimates, particularly at this early stage.
You may recall that the iPhone maker ended up cutting orders for the iPhone 6s models multiple times, so any supply chain news that suggests that this is happening again for the iPhone 7 line would be especially bad news for the company’s stock.
As of this writing, shares of Apple stock are up 1.49% at $97.87 on Tuesday afternoon.