Wells Fargo: 'Bullishness' on Apple 'should be tempered'
REUTERS/Stringer
One bull case for Apple stock is that this year's relatively minor iPhone upgrades is creating a "powder keg" of iPhone users who will wait and jump on next year's device, which is expected to be a drastic revamp with wireless charging and an edge-to-edge screen.
Not so fast, says Wells Fargo Securities analysts. They warn that "bullishness on next cycles should be tempered."
There are two issues with the "powder keg" or "super cycle" bull case, according to a note distributed on Thursday to Wells Fargo clients.
"However, we believe this is the incorrect way to model iPhone units as it has two inherent flaws: 1) not all of the 500MM is what we would consider eligible (we think hand-me-down iPhones, for example, to one's child or even low-end iPhone sales in some emerging countries should not be included in the base) and 2) it ignores the cyclicality and subscriber eligibility evident from our proprietary units per carrier analysis, which suggests the iPhone 8 may have headwinds."
One of those headwinds may be the fact that carriers are basically giving the iPhone 7 away. "The current free iPhone 7 promotions by carriers may impact the 2018 cycle as those that upgrade would see an increase in their monthly bills if they upgrade," the analysts write.
"Aggressive promotions of giving iPhone 7 for free may help unit sales now - carriers will credit the monthly charge for the handset to make it free. However, in two years, subscribers who want to upgrade will see their monthly bills increase $27-$32 per month unless carriers run another free iPhone promotion," according to the note.
Other headwinds that Wells Fargo sees facing Apple include difficult year-over-year comparisons next year, and the cyclical nature of iPhone sales. It gives Apple a "market perform" rating and a price target of $113.55.
- A couple accidentally shipped their cat in an Amazon return package. It arrived safely 6 days later, hundreds of miles away.
- A centenarian who starts her day with gentle exercise and loves walks shares 5 longevity tips, including staying single
- 2 states where home prices are falling because there are too many houses and not enough buyers
- Election Commission issues notification for sixth phase of Lok Sabha polls
- 6 Coffee recipes you should try this summer
- "To sit and talk in the box...!" Kohli's message to critics as RCB wrecks GT in IPL Match 45
- 7 Nutritious and flavourful tiffin ideas to pack for school
- India's e-commerce market set to skyrocket as the country's digital economy surges to USD 1 Trillion by 2030