Apple Inc. investors can now breathe a sigh of relief as it appears that the stock has finally found a bottom after dropping almost 9% since its third quarter earnings release. Fortune reported that five analysts have made the bullish case for Apple as rumors of an iPhone 7 launch in the next couple of weeks make the rounds. Analysts are also hopeful that the slowing growth in China might not be relevant in the big picture.
The shares of Apple recorded a bounce yesterday and the stock closed with 3.64% gains at $119.72. The gains from yesterday’s session build on positive analyst views on where Apple is headed in the short to medium terms. The trading price of Apple has dropped by 8.44% since the earnings release on July 21, almost erasing the 8.46% gains that it has recorded in the year-to-date period.
The bullish case for Apple
Andrew Uerkwitz at Oppenheimer leads the bullish charge for Apple as he sets an “Outperform” rating and a price target of $155 on the stock. He says that Apple is being punished unfairly and that the firm is undervalued. In his words, “we believe the weakness can be attributed to fear over iPhone growth, a slowing Chinese economy, and lack of new growth drivers. We believe discounting Apple based on these concerns is unjustified.”
William Power at Baird sets an “Outperform” rating with a price target of $155 on Apple. He opines that people are planning to buy new iPhones and that the fears about slowing growth are misplaced. In his words, “the percentage of respondents who plan to purchase an iPhone vs. other devices increased 600 bps YOY, and 6S interest is already topping initial 5S interest”.
Toni Sacconaghi of Bernstein has an “Outperform” rating and a price target of $142 on the stock. He tips Apple to defeat Samsung in the high-end smartphone wars as Samsung is being forced to compete with Apple on price. In his words, “there is still ample share for Apple to gain in the very high end of the smartphone market, particularly from Samsung”.
Should you bet on iPhone 7?
Rumors abound that Apple will release its iPhone 7 earlier than expected with a tentative Sept 9 launch. The market expects Apple to fix “Bendgate” and “Hairgate” with the iPhone 7. The problem with iPhone sales however, is not the size, specs or build. The issue is that the smartphone market is maturing (at least in the U.S.) and there’s mostly a replacement market.
However, CEO Tim Cook sees the maturing smartphone market as a huge prospect for upgrades. He says only 27% of the iPhone installed base worldwide has been upgraded to the latest gen iPhone 6 series. iPhone 7 should encourage upgrades and rekindle sales growth. Cook says, “we view that as a very bullish sign on the future, and there’s a lot of headroom left for upgraders.”