Malcolm Owen
Bank of America has changed its stance on Apple's shares by upgrading it from "neutral" to "buy," with analysts suggesting the current state of the iPhone producer's stock "presents opportunity" with multiple prospects for growth from healthcare and the Services business.
February's rebound of Apple's shares in February following the stock market's pessimism after the first quarter results is seeming to continue, based on an investor note from Bank of America. The drop in share price has made the Bank of America's Wamsi Mohan optimistic about the company, with the low cost per share making it an attractive purchase.
After downgrading the stock at the start of November to "neutral," the change in status to "buy" is accompanied by a new price target. While previously it was offering a 12-month price target of $180, it has been increased to $210.
"AAPL stock is down 26 percent from its peak and up 9 percent year-to-date," writes Mohan. "Our scenario analysis suggests that shares are discounting a 'declining hardware' scenario and the debate hinges on the lead time trajectory."
While the lack in growth of iPhone sales in the last quarter's results have shaken investors, Mohan suggests "weakness in hardware is not entirely structural," with the new price target based on "flat" hardware sales and "somewhat slower than historical growth in Services."
In backing up the "buy" status, Bank of America offers a list of eight reasons why Apple is a good deal, including the "stability of supply chain order cuts" as well as growth across multiple sectors, including healthcare and wearables. An "increasing Services penetration" is also cited, with the relatively reliable growth of the arm being a high point in Apple's balance sheet.
Apple's issues in China may also get some relief, the bank suggests, with some of the weakness in the valuable market attributable to a strong U.S. dollar. A rebound of China's yuan will help Apple's prospects in the country.
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2 Comments
I agree with Buffet -- there are no bargains out there -- at least not in the west.
The stock market is still controlled by low interest rates and excess liquidity. And, we saw in December how powerful that effect was when the Fed Chair let a single comment slip out -- and the whole market did an imitation of a Boeing 737-8. Now it is trying to tell itself that "the Fed learned its lesson and will keep supporting us with low rates". But, the Fed is not saying anything of the kind. They ARE saying they are pausing the increases for a bit (But still sopping up excess liquidity at the rate of $50B a month).
The other false assumption is that Trump has intimidated the Fed into making him look good. But, on Sunday, Powell pretty much flipped him the bird. So, don't count on that either.
And yes, Apple is just another fish swimming in the pond. Yes, it's a very big fish. But it's still just another fish swimming in a pond that is drying up.
I bought my APPL stock at $119 and dumped it at $190 so it was a very good run, but I have major concerns about Apple moving forward, mostly the lack of innovation - the annual iPhone reveals are real snoozers now - they need new management blood and bring new hardware to market like Jobs did with the iPad, which came out of left field.