Oppenheimer Sees Apple Underperforming During Iphone's Second Decade
Looking out over the next decade as the iPhone turns 10 in 2017, Oppenheimer analyst Andrew Uerkwitz told investors that he believes Apple (AAPL) is about to embark on a decade-long malaise as it remains overly dependent on the device.
IPHONE DEPENDENCE: As the next decade of the iPhone approaches, Oppenheimer analyst Andrew Uerkwitz told investors in a research note that he believes Apple "lacks the courage" to lead the next generation of innovation such as artificial intelligence, cloud-based services and messaging, and instead will become more reliant than ever on the iPhone. Over the next decade, the analyst noted that he expects the stock to generally underperform the market, acknowledging however that the stock did and could outperform in years with radical redesigns. Uerkwitz said he projects that iPhone unit sales will peak in 2018 at 245M, with tailwinds from first-time buyers and switchers no longer material and a longer replacement cycle due to weaker carrier-provided incentives and a more diverse installed base. Furthermore, he pointed out that Apple may not be able to raise iPhone prices meaningfully beyond the next cycle as the performance gap and hardware differentiation between iPhones and their competitors shrink. While Uerkwitz believes the tech giant is about to embark on a decade-long malaise, its strong profitability, a cash hoard for protection, and one last "growth" hurrah from the tenth anniversary phone will keep investors interested in the company. He reiterated a Perform rating on the shares.
APPLE MAINTAINS VALUE SHARE: Commenting on the smartphone market, Canaccord analyst T. Michael Walkley remains more bullish on Apple's outlook. In a research note of his own, the analyst noted that the company captured a strong share of the premium-tier global smartphone market during the third quarter due to Samsung's (SSNLF) "significant" profit decline following the Galaxy Note 7 recall, and said he believes Apple will extend its leading market share of the premium tier smartphone market installed base. Further, Walkley anticipates a stronger upgrade cycle in 2018 with the 10-year anniversary iPhone 8, while expecting steady iPhone 7 sales to help the company return to growth in the first quarter. The analyst reiterated a Buy rating and $140 price target on Apple's shares.
PRICE ACTION: In morning trading, shares of Apple have advanced about 0.6% to $110.76. Over the last month, the stock is down about 5%.
Disclosure: None.