Apple stock rose steadily on Monday as analysts focused on the mixed bag associated with the iPhone 7 Plus. On one hand, the phone is extremely popular, especially because of Samsung’s recall of the Galaxy Note 7, but on the other, supply is very constrained. Apple stands well-positioned to capture strong sales this holiday season as the Consumer Technology Association’s recent survey indicated that about 116 million shoppers plan to buy tech or tech accessories sometime during Black Friday week.
Apple to benefit from a record week for tech
The CTA expects total retail sales to rise by 3.8% this year, which is a slight deceleration from last year’s 3.9% gain. However, spending on tech is expected to grow much more this year than it did last year, Drexel Hamilton analyst Brian White noted in his Nov. 21 that the CTA projects a 3.1% increase in consumer tech spending, compared to last year’s 1.4% increase. The organization also found that 75% of consumers intend to purchase tech as gifts this year, which is a slight increase from last year’s 74%.
The survey indicates that most consumers who plan to buy tech during Thanksgiving and Black Friday week intend to purchase TVs. Interestingly, laptops are in second place, demonstrating that the computer market is indeed starting to stabilize.
Historically, the Chinese market has been relatively isolated from international investors, but much is changing there now, making China virtually impossible for the diversified investor to ignore. Earlier this year, CNBC pointed to signs that Chinese regulators may start easing up on their scrutiny of companies after months of clamping down on tech firms. That Read More
However, Apple’s new MacBooks could be a factor in that decision. Smartphones are in third place, which places the iPhone maker in a strong position to benefit from the holiday shopping season. Notebook computers are at the top of the tech wish list for 11% of adults, while 8% of adults hope to get a smartphone.
Apple stock rides on return to growth
Debate about whether the iPhone 7 and 7 Plus will help Apple return to smartphone unit growth continues, and Canaccord Genuity analyst Michael Walkley is firmly in the growth camp on this one. He said demand for the iPhone 7 is strong and expects steady sales of the phone to enable Apple to return to growth in the December quarter.
Apple stock has been hanging on the iPhone for many years now, and Walkley said in his Nov. 20 report that the company garnered 106% of the premium smartphone market’s profits during the third quarter, compared to 75% in the previous quarter. He believes that Samsung’s recall of the Note 7 has given Apple a boost, and he pegs Note 7 sales at about 20 million units per year, amounting to $5 billion to $6 billion in revenue.
Another factor in how well Apple will do this year is the iPhone 7 Plus, which he notes is doing better than the smaller iPhone 7. The problem is that the Plus models are supply constrained, thus keeping a ceiling on the company’s share gains within the premium tier of the smartphone market. Despite this limitation, he expects Apple to end the year with an installed base of more than 570 million iPhones.
Apple stock will underperform: Oppenheimer
On the flip side, Oppenheimer analyst Andrew Uerkwitz is predicting that Apple stock will underperform the market for the next 10 years because he expects the company to enter a “decade-long malaise.” He noted that the iPhone turns 10 years old next year, and he expects the tenth anniversary iPhone to be “one last ‘growth’ hurrah” for Apple. He also predicts that the tenth anniversary iPhone will keep investors interested in Apple stock for now, as will the company’s strong profitability and cash war chest.
In general though, he thinks the company lacks the guts to lead the way in upcoming areas of innovation, including artificial intelligence, the cloud, and messaging. This is an interesting view, as Apple recently touted its removal of the headphone jack on the iPhone 7 lineup as an act of courage which essentially makes it a trailblazer. It remains to be seen whether this will actually be the case, especially since the company has thus far failed to bring its AirPods to market.
Shares of Apple stock rose by more than 1% to as high as $111.94 during regular trading hours on Monday.