Apple Investors Should Look Beyond Next Quarter

For months, all Apple Inc. (Nasdaq: AAPL) analysts have talked about is the iPhone X and the potential for massive buybacks following the tax repatriation holiday. But even though investors still don’t have a crystal clear picture of the current iPhone cycle or Apple’s capital return plan, analysts are now saying it’s time for investors to start looking ahead to the next round of catalysts.

With Apple shares down 2.5 percent in the past month, Daniel Ives, head of technology research at GBH Insights, says fears over the iPhone X cycle are already baked into the stock price. Ives says investors should forget about the potentially disappointing March quarter iPhone sales and focus on three bullish catalysts on the horizon: new products, China growth and buybacks.

Ives is predicting Apple will release three new iPhone models over the next six to nine months with price points and features designed to appeal to customers who decides not to upgrade to the iPhone 8 or iPhone X. In addition, Ives says there are up to 70 million iPhones in China that are in need of an upgrade within the next 12 to 18 months.

Finally, Ives expects Apple to announce up to a $300 billion stock buyback in April.

“In a nutshell, while this is a hand-holding period on the name, we believe near-term turbulence does not change our long-term bullish thesis on Apple, and the underlying demand/upgrade drivers for the next 12 to 18 months remain intact,” Ives says.

But while Ives says current iPhone cycle disappointment is already priced into the stock, Raymond James analyst Chris Caso says the buybacks are too.

“The next catalyst for the stock will be the announcement of a massive cash return program in April, yet because that’s well known we don’t consider it enough of a reason to be overweight the stock,” Caso says.

Like Ives, Caso says the next true catalyst could come in the second half of the year when Apple unveils its new product lineup.

“We expect three new high-end [iPhone] models this fall, which provides the company some opportunity to tune features, price points, and memory to better match demand at each price point – and thereby improve overall profitability,” he says.

GBH has…

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