Apple Inc. stock fell below the $100 per share price after the tech firm released its Q1 earnings report last month. Now, the stock appears to be respecting the $90 level by not going below it. Investors are somewhat confused about when it might be a good time to invest in the stock.
Bears vs. Bulls
To answer such questions, RBC Capital Markets analyst Amit Daryanani and his team released a report on May 8, saying investor sentiment on the iPhone maker is negatively skewed currently, but they believe the stock is oversold.
Apple released its earnings report on April 26, and since then its shares declined by 11% in comparison with the S&P 500 that declined by 2% in the same timeframe. The RBC team notes that since the stock has declined, therefore, the interest of investors has grown, but they are trying to gauge whether it is close to a bottom or not.
There are concerns that the replacement cycle of the iPhone is growing longer, and the iPhone 6s is a weak device as it led the firm to report its first ever unit decline for the quarter ending March. On top of this are the reports that the iPhone 7 won’t be much different than the iPhone 6s.
In contrast, Apple Inc. bulls expect the long term iPhone growth to accelerate and the replacement cycle to smoothen out this year and next, especially with Apple reportedly releasing iPhone with OLED display. They also believe that the services will help generate huge amount of revenues going forward as in the March quarter they contributed 12% to the total revenue.
Daryanani and team note that Apple’s current valuation is within 10% of its 2013 troughs, so the stock can be expected to rally, but within the $90 to $110 range. The team believes Apple’s iPhone cycle will continue to get longer and “keep a lid on revenue/EPS growth for AAPL till we get an innovative iPhone iteration.”
Analysts expect Apple to bounce back
Dan Morgan, senior portfolio manager at Synovus Trust notes that Apple’s trouble in China is an “icy path” for the US firm. “But that also means there’s tremendous room to grow. If they can go from 13 percent to 20 percent market share, that would be huge,” Morgan told CNBC’s “Squawk on the Street” Monday.
Dividend yield on Apple’s stock is above 2%, and Morgan said he is happy to wait for the stock to bounce back, especially while the 10-year Treasury notes are yielding returns around 1.8%.
Apple Inc. stocks dipped below $95 recently after which David Katz – chief investment officer at Matrix Asset Advisors – took a small position in Apple. By the time investors regain their confidence in Apple’s stock, it will jump 15% higher, predicts Katz.
Historically, Apple’s new iPhone help boost the stock on their release, and hence Kutz and his team are waiting for the release of the next-gen iPhone. Speaking on CNBC’s Power Lunch, Katz said, “It’s very important to put Apple’s valuation in perspective,” adding “It’s a very good place to be.”