When it comes to Apple Inc. (NASDAQ:AAPL) stock, analysts generally agree that right now just isn’t a good time for the iPhone maker. However, they disagree about how far into the future we have look in order to see recovery. Some expect Apple stock to recover in fiscal 2017 with the iPhone 7 cycle, which they expect to be much better than the iPhone 6s cycle.
Others don’t expect a recovery until the iPhone 8 (or whatever the 2017 iPhone ends up being called), while still others think it will take a magnificent new product for Apple to recover. It is certainly quite interesting to read all of the bearish reports on Apple Inc. (NASDAQ:AAPL) that are written by analysts who have a Buy rating or the equivalent on its stock.
iPhone SE cannibalizing iPhone 6s
Nomura analyst Jeffrey Kvaal warned in a report dated June 21 that the current setup for Apple stock is “unfavorable,” adding that consensus estimates for fiscal third quarter iPhone units may not fully account for the channel fill for the iPhone SE. He’s actually expecting Apple to come out ahead of estimates on units but behind on average selling price. The reason is because signs have pointed to better-than-expected demand for the lower priced iPhone SE, which, when paired with low total volumes, points to cannibalization of the more expensive flagship iPhone 6s.
Looking to the fiscal fourth quarter, he explains that the inventory drawdown for the iPhone 6s should be over, but demand for it will also keep fading, and the company will have refilled the iPhone SE channel. However, he adds that this might not matter because visibility is improving while expectations for the September quarter remain high.
Kvaal has a Buy rating and $120 per share price target on Apple Inc. (NASDAQ:AAPL) stock and said he’s looking past the September quarter and banking on a better fiscal 2017.
Threat from China
UBS analyst Steven Milunovich has a Buy rating and $115 price target on Apple Inc. (NASDAQ:AAPL) stock, and despite this his June 17 report sounds quite bearish. A Chinese court reportedly ordered the company to stop selling the iPhone 6 and 6 Plus in China based on a ruling in a patent case, although Apple has since denied that it has halted sales of the handsets there and said it is appealing the ruling.
Milunovich noted that he’s written about China as an “existential threat to Apple” in the past because Beijing could start to favor domestic smartphone suppliers. However, he adds that it “seems early” for that existential threat” despite the ruling against Apple. Instead, he sees this as being a “long-term risk.”
His bullish thesis hinges on his analysis which implies that there’s only downside risk if iPhone sales decline by more than 5% or 10% each year. He expects unit numbers to stabilize in fiscal 2017 and increase 15% in fiscal 2018, which he said will justify a higher multiple.
Looking further out for Apple stock
And then we have a report from Lombardi Financial analyst and editor Jing Pan posted on Profit Confidential. He said bears are wrong about Apple stock and that its “run is far from over.” However, he is looking much further out than most analysts are for the next big run in the iPhone maker’s shares. He noted that in 2007, the year the first iPhone was launched, Apple Inc. (NASDAQ:AAPL) stock was trading under $20 per share on a split-adjusted basis, and at that time, no one would have thought that the company would go on to sell more than $30 billion worth of iPhones per quarter.
He seems to believe that it will take a new blockbuster product to trigger massive sales and the next huge run in the company’s stock. The analyst notes that there are some products that could end up being the blockbuster Apple Inc. (NASDAQ:AAPL) needs to get things going again. For example, he suggests that the company might become “the next media giant,” pointing to the report that it was considering buying Time Warner at one time.
He also pointed to services like iTunes and Apple Music and noted that the company doesn’t have a meaningful presence in video. However, he suggests that Apple Inc. (NASDAQ:AAPL) could hit it big by acquiring “a company with solid assets in video,” referencing the recent Netflix rumors without actually naming the video streaming giant. And then there’s always the rumored Apple car of course, he adds.