Forget Credit Suisse; Here’s Why I’m Bullish on Apple Stock
If there’s one company that’s suffered the most at the hands of Wall Street traders, despite stellar financial performance, it has to be Apple Inc. (NASDAQ:AAPL). After reporting its biggest-ever profits this year, AAPL stock has been staggering to make it beyond the $120.00 mark. And it did for the first time in three months, only to rout by three percent in one day.
It would have made sense if the slump in AAPL stock had come in response to the better-than-expected jobs report, which has put the possibility of a rate hike back on the Fed’s table. However, the recent plunge has apparently less to do with that and more to do with a questionable report coming out of Credit Suisse. (Source: “CREDIT SUISSE: Apple is slashing iPhone orders,” Yahoo! Finance, November 10, 2015.)
The culprit of the latest sell-off in AAPL stock is a bearish signal by a Credit Suisse analyst who has cited a slowdown in Apple’s supply chain. The analyst seems to have discovered that the company has cut down orders for hardware components by about 10% and somehow links it to the demand for Apple’s recent launch and biggest revenue driver, the iPhone 6s lineup.
Here’s What Credit Suisse Is Missing On Apple Stock
I’m taking this report with a grain of salt for a number of reasons.
To begin with, the report is extremely vague. The analyst has failed to mention which supplier was checked and for what hardware components. The supply could have been cut for any of Apple’s products other than the iPhone. With the current information available, there’s no way to link it to iPhone 6s sales.
Bear in mind that both the iPhone 6s and iPhone 6s Plus had a great opening-week reception and sales figures were stellar in the quarterly report two weeks ago. The company reported strong demand for the latest installment and set a new sales record on the launch weekend. In fact, if my memory serves me right, the company reported the demand for the phones to be outpacing supply.
Secondly, the decline in supply orders could have been for a number of reasons: the company could be deciding to go for a substitute supplier; the company could be gearing up for the next iPhone launch; or the company may be facing sales cannibalism (CEO Tim Cook had indicated that the iPad 4 Mini and iPhone 6 could cannibalize each other’s sales, but the company didn’t see a threat in it).
Now, the most outrageous part of this analyst’s report is that after sending bearish signals to the market, the analyst continued to commit to their outperform rating, setting a target price of $140.00 for AAPL stock.
Chart courtesy of www.StockCharts.com
The sell-off in AAPL stock is clearly unwarranted. It goes without saying that the analysts have been shooting in the dark, taking down the stock price in the process. I see iPhone sales remaining strong in the next quarter. The company’s recently announced iPhone upgrade program, which allows users to upgrade to the new iPhone by paying in easy installments, should help bolster its sales.
Here’s the Bottom Line on AAPL Stock
Apple is a blue-chip S&P 500 company that has the largest cash reserves on hand and has reported the largest annual profits this year. The bearish sentiment on the Street is completely uncalled for.
Sensible AAPL stockholders should stick with the stock, especially as it pays a dividend tomorrow. For prospective AAPL stock investors, the recent dip creates the perfect entry point.
The bottom line: Apple stock is likely to rebound once the dust around this analyst’s report settles.