Apple Inc. ($AAPL): Analyzing Arguments of The Bulls and Bears

Investors are closely watching Apple Inc. (NASDAQ: AAPL) stock after the company reportedly asked its major suppliers to look into the feasibility of shifting about 15% to 30% of its production from mainland China to Southeast Asia. Analysts think that Apple’s production shift will result in higher costs and production problems. Earlier this month, investment firm JPMorgan cut its price target for Apple stock to $233 from $235. Analyst Samik Chatterjee cited U.S.-China trade war for the bearish outlook. The analyst slashed his estimate for iPhone sales by 4% to 139.5 million units for the second to fourth calendar quarters.

Chatterjee said that the macro environment uncertainty amid the U.S.-China trade war would result in decreased consumer spending. This could create problems for Apple.

Credit Suisse is also bearish on Apple stock. The firm recently said that competition in China remains a fundamental challenge for iPhone maker.

On June 18, KeyBanc also cut its FY20 revenue and earnings estimates, amid iPhone sales problems. Analyst Andy Hargreaves said there is “little optimism” around a recovery in FY20 amid stagnant global demand, especially in China.

The analyst slashed his forecast for iPhone unit growth to 2% from 5% for fiscal 2020.

Why Should You Sell Apple Stock

Apple is currently getting a lot of attention from analysts. Despite trade war issues and iPhone sales declines, the stock is up 23% year to date, as of June 11. While almost every analyst now believes that Apple has serious problems with its iPhone business, many think that Apple stock has growth potential amid the company’s services and content business.

Earlier in June, Evercore ISI said in a report that Apple has “plenty of upside”. The firm initiated its coverage of Apple with an Overweight rating. Apple’s service revenue over the last 12 months has grown by a whopping 23% year over year.

Over the last 12 months, apart from the iPhone business, whose revenue is down 2% year over year, every other segment is growing. Mac and iPad revenue over the past year are up 4% and 1%.

Apple’s segment related to wearables, home, and accessories is also showing strong growth. Its revenue is up 33% year over year.

Based on the arguments above, it seems the bears have the upper hand, especially for investors who are looking on short-term prospects.

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The author does not own any of the stocks discussed in this article.


Published by
Fahad Saleem, Contributing Editor

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