There’s a lot up in the air right now for Apple (AAPL), argues Wedbush analyst Daniel Ives. The analyst foresees some dark days ahead for the tech giant before emerging on the other side.
After speaking to supply chain contacts in Asia, it appears demand for iPhones has deteriorated by a further 15% when comparing current shipment numbers to the original expectations. In the current uncertain economic environment, this is hardly surprising.
“These data points are generally in line with our initial stress test model which significantly reduced our March/June iPhone units to reflect this near-term economic abyss,” Ives said.
Looking ahead to next week’s earnings report, Ives sets an ominous tone and believes the Street is prepared for a “Friday the 13th-like March quarter and June guidance.” Ives points out, bluntly, that “global lockdown has put health, jobs, groceries, and hand sanitizer well above buying a $1,000+ iPhone 11 on the consumer priority list in this environment.”
However, with the bad news out of the way, Ives believes investors will look through the macro challenges and focus on the upcoming iPhone 12 cycle. The problem right now is that all dates concerning the launch remain speculative as no timetable has been announced. The Street will be looking for clarity from Apple CEO Tim Cook, regarding this issue, in next week’s earnings call.
Ives believes the launch will be pushed back to the holiday season in order to ensure a smooth lift off for Apple’s leading product. The analyst points out that the logistics and planning that go into coordinating the release, “make the original Fall timeframe a very difficult one to hit.” Yet, despite the present uncertainty, Ives believes Apple has what it takes to emerge relatively unscathed on the other side.
Ives concluded, “Our Asia checks and supply chain contacts are now looking at iPhone units in the 165 million to 185 million range for CY20 with strong underlying momentum into CY21 on the heels of iPhone 12… In sum, it will be some dark days ahead for Cook & Co given this unprecedented COVID-19 environment, however on the other side of the valley the pieces are in place for a robust product cycle into FY21 with a more normalized macro backdrop.”
The 5-star analyst keeps an Outperform rating on Apple shares, along with a $335 price target, which implies about 18% upside from Friday’s closing price. (To watch Ives’ track record, click here)
TipRanks shows a large amount of bulls liking the odds here. Out of 35 analysts tracked in the last 3 months, 27 are bullish on Apple stock, 6 are playing it safe on the sidelines, while just 2 are running for the hills. However, is the stock overvalued or undervalued based on these analysts’ expectations? The 12-month average price target of $310.23 suggests a nearly 10% upside potential from where the stock is currently trading. (See Apple stock analysis on TipRanks)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.