Apple stock currently has limited potential downside for investors, UBS says

Posted:
in AAPL Investors edited June 2016
Barring a complete meltdown of its iPhone business, shares of Apple stock have limited potential downside at their current trading price, investment firm UBS said on Tuesday.




Analyst Steven Milunovich believes that unless the iPhone sees a colossal meltdown akin to the failures of BlackBerry, Apple should not trade any lower than its current range between $95 and $105. In his view, AAPL stock has limited downside for investors at its current price.

Milunovich believes Apple's current share price reflects the outlook of "product cycle bears," who believe the iPhone could see annual declines of between 5 and 10 percent, much like the PC business. But in his view, this outlook for the iPhone business is "probably too negative."

Instead, UBS has maintained a price target of $115 for Apple stock, with a "buy" rating for investors. At that valuation, Milunovich sees Apple largely as a service-focused company.




The analyst predicts that Apple will continue to sell profitable hardware, but will pivot to becoming a service-oriented company where its customers are monetized through products like Apple Pay, Apple Music and the App Store.

For shares of Apple to really move the needle and move to $120 and beyond, Milunovich believes Apple needs to introduce new hardware and products that will resonate with consumers. Even if a new product were to achieve just 25 percent of the success of the iPhone, he believes that could push the company's stock price to a range between $130 and $150.

Milunovich's most bullish scenario for Apple sees the company hitting "another hardware home run" that achieves 50 percent of the success of the iPhone. In addition, if the company were to launch a rumored "Apple Car" around the year 2020, he said he could see shares of AAPL reaching as high as $200.

For now, however, Milunovich remains squarely in conservative territory with his outlook on Apple, and believes the company's stock could reach $115 within the next year. His forecasts call for iPhone sales to grow by 2 percent in fiscal year 2017, driven by consumers who have yet to upgrade from the 4-inch form factor to larger models.

Comments

  • Reply 1 of 10
    slurpyslurpy Posts: 5,005member
    Do these firms get paid fuckloads of money to state the obvious? My dog would know this, if I had a dog. 
    fotoformatretrogusto
  • Reply 2 of 10
    eightzeroeightzero Posts: 2,013member
    slurpy said:
    Do these firms get paid fuckloads of money to state the obvious? My dog would know this, if I had a dog. 
    The technical term is a "metric fucktonne."
  • Reply 3 of 10
    williamhwilliamh Posts: 597member
    I agree with the previous comments.  Downside risk is like 30% less than it was, duh!
  • Reply 4 of 10
    MacProMacPro Posts: 17,378member
    slurpy said:
    Do these firms get paid fuckloads of money to state the obvious? My dog would know this, if I had a dog. 
    Funny you should say that, my cat actually expressed all those exact same comments over dinner last night.
  • Reply 5 of 10
    FatmanFatman Posts: 133member
    Stock prices have never been based on logic. I tell people new to trading to leave common sense at the door and do the exact opposite of a rational person. High risk, non-profitable, companies with half-baked business plans are where you need to trade to make money! Stay clear of hugely profitable, quality, powerhouse brands with global reach - they are way too predictable, safe, and stable (yawn!)
  • Reply 6 of 10
    retrogustoretrogusto Posts: 645member

    Milunovich's most bullish scenario for Apple sees the company hitting "another hardware home run" that achieves 50 percent of the success of the iPhone. In addition, if the company were to launch a rumored "Apple Car" around the year 2020, he said he could see shares of AAPL reaching as high as $200.

    Given that they could easily buy back and retire half of their outstanding shares by 2020 (which would double their earnings per share even with zero profit growth), that doesn't seem like much of a stretch.
    neil anderson
  • Reply 7 of 10
    misamisa Posts: 827member
    There are other things that would result in a bearish outlook, but those are mostly "capital flight risks" rather than business mistakes. Capital tends to move in and out of equities and bonds depending on outside events, and as everyone has seen Carl Icahn and Warren Buffet switch their positions on Apple.

    If Apple would just bring back the upgradable Mac Pro tower, professionals would come back, or licence OS X+motherboard to to the BYO pc workstation market (eg a Socket 2011-3 board.) That said, the lions share of what Apple does right now is around iOS, and short of doing something stupid like licencing iOS/OS X to generic low-quality hardware makers (again) would be hard pressed to screw things up.

    The "Apple Car" is probably not going to be anywhere near as revolutionary as people are predicting, especially if it's not an electric car.
  • Reply 8 of 10
    robin huberrobin huber Posts: 3,171member
    "Limited potential downside"? Boy, does that sound like something out of 1984 or A Clockwork Orange. Double plus bad? A little like saying your car has limited potential downside to kill you. Talk about faint praise. 
  • Reply 9 of 10

    Milunovich's most bullish scenario for Apple sees the company hitting "another hardware home run" that achieves 50 percent of the success of the iPhone. In addition, if the company were to launch a rumored "Apple Car" around the year 2020, he said he could see shares of AAPL reaching as high as $200.

    Given that they could easily buy back and retire half of their outstanding shares by 2020 (which would double their earnings per share even with zero profit growth), that doesn't seem like much of a stretch.
    Thank you for reminding me of that. (I'm not being sarcastic.)
  • Reply 10 of 10
    I wouldn't trust anything these people say. Apple has plenty of downside. More in fact than Tesla, Amazon, Microsoft or any other tech stock with far higher P/Es than Apple. Tim Cook has turned Apple shareholders into big losers with Apple under-performing terribly. If you look you can see that even Yahoo has outperformed Apple in share gains over the past year. That's how badly the big investors think of Apple. I think the bottom can drop out of Apple very easily. There's nothing but constant bad news for Apple. Nothing they do is ever considered a good move. All I see about Apple nowadays is news about how Apple is selling bonds or something to finance buybacks and dividends. Why? Because Apple can't touch that $233B overseas stockpile. All Wall Street is interested in is how many iPhones Apple can sell and there's nothing but bad news over how Apple won't be able to sell many iPhones in India or any other poor emerging nation. Of course, there's the scary longer replacement cycle to scare off investors. Now Android OS has about 85% of the smartphone market and iOS market share is fading fast. Add to the proliferation of Chromebooks in schools and the bad news turns even worse. Apple is offering nothing to investors in the way of returns that they can't get elsewhere from any other tech company. Without someone like Steve Jobs to shake things up, Apple is never going to increase in value. It's really difficult to place any faith in Apple and there's only the dividends to hold shareholders to the company.
    pjanders
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