Is Apple Inc. (NASDAQ:AAPL)’s stock range-bound? Barclays analysts think so, and as a result, they have downgraded it from Overweight to Equal Weight. However, they have left their price target unchanged at $570 a share.
Apple stock could be range-bound for a year
Analysts Ben Reitzes and Ryan Jones think it’s possible that Apple Inc. (NASDAQ:AAPL) will trade within its recent range for about the next year or so. Unlike other analysts, who are hyped up about the financial prospects of an iWatch or iTV, they couldn’t bring themselves to raise their estimates based on those rumored projects. In fact, they’re not sure these products will be able to “move the needle” as much as new categories did for Apple “in the old days.”
A decade ago, no one talked about tail risk hedge funds, which were a minuscule niche of the market. However, today many large investors, including pension funds and other institutions, have mandates that require the inclusion of tail risk protection. In a recent interview with ValueWalk, Kris Sidial of tail risk fund Ambrus Group, a Read More
The Barclays team admits to being excited about some of Apple Inc. (NASDAQ:AAPL)’s rumored products, like payments, wearable devices, geo-location and improvements in the Apple TV. However, they don’t see anything revolutionary ahead. They think Apple is all about iPhones and believe that new categories seem to be aimed at increasing the usefulness of the iPhone. However, they don’t think these categories will re-accelerate growth in the smartphone category to sustainable double-digit levels. The one thing that might change their mind is if they saw “evidence that payments and / or new content deals” will enhance Apple’s web services against Google Inc (NASDAQ:GOOG) and other competitors in the long term.
What about Apple’s valuation
They see the valuation argument regarding Apple Inc. (NASDAQ:AAPL) as becoming less helpful as time goes on. They even went so far as to compare the company with Microsoft Corporation (NASDAQ:MSFT), which remained range-bound for many years. Because of that, they don’t believe technology companies will begin to outperform again after a difficult year or two because the law of large numbers begins to catch up with them.
They also suspect that Apple Inc. (NASDAQ:AAPL) will begin to see margin pressures as it adds more and more advanced features to the iPhones at similar price points this year and next. And if margins have peaked, then they also see this as a sign that shares could be range-bound. However, they don’t see anything really wrong with this happening until Apple is able to create new markets within the cloud.