Apple Is Stumbling To Keep Pace

Decrease in the demand of Apple iPhone has caused panic among investors.

Apple Inc. stocks have been struggling to keep pace since quite some time. This is due to the increasing concerns pertaining to the growth of the iPhone. Investors are extremely concerned about the staggering demand of the iPhone 6s since the market for expensive phones is saturating.

Apple stocks have experienced a 11% drop over a time span of the past six months. Considering this situation, the company is geared up to report it earnings for the second quarter of FY16. The analysts at The Street are expecting revenues worth $52 billion whereas the company’s adjusted earnings are likely to be $2.00 per share.

Brian White an analyst at Drexel Hamilton has come up with his prediction of the earnings. He forecasts a decline on a year over year (YOY) basis in terms of the iPhone shipments for the present trimester. This is due to the tough competition and the closure of the iPhone 6 product cycle.

However, at this point, the analyst is optimistic since the launch of the iPhone 7 is scheduled in fall. Moreover, he is also intrigued by the updates from the capital return program. Mr. White stated, “We continue to look forward to a new iPhone cycle with the iPhone 7, the potential for an enhanced capital return program for shareholders and new geographic opportunities (e.g., India, Tier 3-5 cities in China). Moreover, Apple trades at just under 8x (ex-cash) our CY:17 EPS projection.”

At this point there is some volatility in the Apple market since the iPhone 6s series has finally come to an end of its two yearlong product cycle. He is of the view that the users are waiting for the iPhone 7 to make its debut. Moreover, the analyst talked about his recent visit to China and Taiwan where there was a surge in the demand of iPhone SE.

For the quarter in June, the analyst is predicting sales worth $44.44 billion and the earning per share to be $1.6. However, the estimates by Street’s are $47.32 billion and $1.76. It is assumed that the management will be extremely particular in the third quarter due to the macro environment and end of iPhone 6 cycle.

“That said, we expect Apple to expand its capital return program from the $200 billion ($153 billion used as of 1Q:FY16) through March 2017. If Apple maintains a March 2017 expiration, we believe a $30-$40 billion expansion is possible, including a 10-12% cash dividend increase,” Mr. White explained. Analysts at Drexel Hamilton have maintained a Buy rating on the company’s stocks with a price target of $200.

Considering the present sales graph of the iPhone, AAPL decided to come up with iPhone SE that had a small screen for growing markets like China and India. The phone is priced $399 which is rather expensive for the targeted nations. However, it has been deduced that the company has hiked old iPhone prices in India to circulate iPhone SE. Analysts believe that by marginalizing the price of iPhone SE, sales can bolster even further.