Has Apple (AAPL) Stock Finally Bottomed?

Apple stock

Following Apple’s (AAPL) better-than-expected fiscal Q3 results, Citi’s Jim Suva in a research note sent out to investors this morning raised Apple’ stock price target to $120, saying last night’s results and guidance alleviates the concerns that could have pressured the company’s shares further. For Q416, Apple guided revenues of $45.5 billion to $47.5 billion, as compared to analysts’ expectations of $45.80 billion. Suva maintains a ‘Buy’ rating on Apple stock.

Alongside Citi’s (C) analyst, Piper Jaffray’s Gene Munster also issued a research report on Apple stock. While the analyst lowered his price target on Cupertino’s shares to $151 from $153, he said Apple’s third-quarter results and Q4 outlook suggest that Apple’s business is stabilizing and “trending in the right direction.” Munster reiterates an ‘Overweight’ rating on the name.

In addition to Piper, Raymond James’ Tavis McCourt also issued a note on Apple stock, upgrading the iPhone maker to ‘Outperform’ with a $129 price target. The analyst said he expects a “long, slow re-rating” of ticker as the tech giant shifts to a consumer staple.

In its quarterly report last night, the tech giant said it earned $1.42 per share, well above the $1.38 per share analysts were expecting. Revenues however, fell 14.6% against the comparable year-ago figures to $42.36 billion, but above views for $42.10 billion. iPhone sales came in at 40.4 million units, slightly higher than 40.2 million expected.

Analysts have expressed widespread concerns that consumers aren’t upgrading their iPhones as often as they used to. In fact, Apple sold 7.1 million fewer iPhones in the third fiscal quarter compared to the same period last year. Given the fact that the iPhone represents close to 65 percent of Apple’s sales, the decline is rather significant as it obviously affects total revs in the near term. That said however, Apple stockholders shouldn’t see Apple as a business in decline when in reality its business is far from struggling. iPhone unit sales in Q316-for instance came in higher by 5.2 million units when compared with the same period a couple of years ago. Apple sold 35.2 million iPhones in Q3’14. Also, the company still has an incredibly strong reputation and unparalleled customer loyalty, suggesting Cupertino’s overall customer base isn’t going anywhere anytime soon.

Furthermore, revenue in services in Apple’s earnings report was another category that could give the company an even brighter outlook. Sales in services, which includes iTunes, the App Store, iCloud, Apple Pay, Apple Music, Apple Care, and licensing spiked 19 percent as the app store hit an all-time record, Cupertino said. What’s more, the company’s services segment is already growing at an impressive pace. Services now account for 11% of Apple’s overall revenue, up from 8% in the year-ago period. Apple CEO Tim Cook said during last night’s conference call that he expects Services category to be “the size of a Fortune 100 company by next year.”

Apple Stock Prospects

These encouraging news and the fact the company surpassed analysts’ bottom-line estimates for the quarter, could inject some much-needed optimism in Apple stock. That said, the name will not bet at $130 in a couple of weeks. But a combination of low valuation-11.6x next year’s forecasted earnings, with an overall loyal customer base and booming services segment should be able to put a bottom under the stock. Technically speaking, as long as the stock holds above the gap at $100, its pent up momentum stays intact.

Apple shares are trading higher this morning by nearly 7% to $103.42. Shares in the $530 billion market cap company are now down 19.65% on a year-over-year basis and off about 9% from a 52-week high of $123.82 per share.

Of 44 analysts who follow Apple stock, 38 rate the name a ‘Buy’ while 4 recommend holding shares. Only two analysts rate it a ‘Sell’. The majority of analysts have a median price target of $120.00 with a high target of $185.

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