Apple Inc. (AAPL): Analyst Gives Apple Stock Cautious Nod

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Apple Inc. (AAPL) shares are up  roughly 1% along with the broader market, despite a cautious note this morning from Oppenheimer’s Andrew Uerkwitz. The firm’s analyst says he does not expect Apple’s third-quarter results on 7/26 and forth-quarter guidance will change his view on the company. He believes that questions like China or  replacement cycle, debated in previous earnings, will matter little as investors will focus on iPhone 7 release in the fall. Uerkwitz continues to believe that the iPhone 7 product cycle should be weak due to lack of major improvements. The analyst lowered his 2017 iPhone shipment projections to 197 million from 213 million units, noting the iPhone 7 cycle will undersell the 6s cycle.

Moreover, Uerkwitz cut Cupertino’s full fiscal-year 2017 revenue and earnings per share estimates by $13 billion and 86 cents, respectively, to $209 billion and $8.18 per shares based on lower iPhone and Apple Watch shipments. The analyst reiterates a ‘Perform’ rating on the shares.

Oppenheimer downgraded Apple back on April 27, saying weaker performance seen in the second quarter – the company’s worst quarter in over a decade – will continue. Apple reported 2Q16 total revenues down 33% sequentially, while announcing weaker-than-expected 3Q guidance, which implied an 11% year-over-year decline in revenue compared to the year-ago quarter. A key reason for the plunge in revenue was Apple’s year-over-year decrease in iPhone sales.

“We are downgrading Apple to Perform as we believe that weaker performance seen in this quarter is likely to recur until 2017’s iPhone launch. We believe Apple won’t provide a compelling reason to upgrade until then, when the new iPhone adopts more virtual reality-friendly features. Such belief leads to our more bearish outlook for the coming iPhone cycle (“iPhone 7″) and has us look past favorable longer term trends.” Uerkwitz wrote back in April, confirming investors concerns that the company has gone past its prime.

He also noted that he sees Apple shares trading sideways “while investors grapple with perceived slowing innovation and unit growth on the one hand, and massive cash generating, dividend paying, attractive valuation on the other.”

Price Action

Apple stock continues to suffer as investors worry about slowing profit growth in the second half of the year. The name recently traded at $96.58, a gain of $0.64 over Thursday’s closing price. The $529.01 billion market cap company continues to trade below $100, a level not seen since mid-October 2014. The stock – one of the most widely held stocks by individual investors – has plunged more than 27% from its all-time high of $132.97 notched on July 20, 2015.

AAPL shares have declined 3.12% in the last 4 weeks and 11.07% in the past three months. Over the past 5 trading sessions the stock has gained 1.63%. In the past 52 weeks, shares of the tech giant have traded between a low of $89.47 and a high of $132.97, with the 50-day MA and 200-day MA located at $96.82 and $99.87 levels, respectively. Additionally, shares of Apple trade at a P/E ratio of 1.26 and have a Relative Strength Index (RSI) and MACD indicator of 54.83 and +0.99, respectively.

AAPL currently prints a one year loss of about 20 percent, and a year-to-date loss of around 8 percent.

As for passive income investors, the company pays shareholders $2.28 per share annually in dividends, yielding 2.40%.

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