In case you didn’t know, last Friday was Apple Inc.’s (NASDAQ:AAPL) 40th birthday. The company has come a long way, but since last summer, markets haven’t been that nice to AAPL stock. Will this year be better for Apple stock investors?
Forget the iPhone SE, Here’s Why AAPL Stock Could Soar
Well, if you ask Timothy Arcuri, an analyst at Cowen Group, the answer is yes. He recently upgraded AAPL stock to “Outperform” and raised the price target to $135.00. That would imply a nearly 25% upside in what is already the largest company in the world by market cap. (Source: “Apple Rebound Coming: Expert,” CNBC, March 30, 2016.)
The negative sentiment surrounding the company’s “iPhone” sales has really brought down its stock price since last July. No doubt, as Apple’s largest revenue source, any sign of slowdown in iPhone sales would put pressure on Apple stock. But according to Arcuri, the worst could be over.
He’s not looking at the recently introduced “iPhone SE.” Rather, the analyst is looking two generations ahead. In an interview with CNBC, Arcuri predicted that in 2017, Apple could give a serious upgrade to its smartphones—flexible OLED screens.
OLED (organic light-emitting diode) screens have quite a few advantages over today’s LCD (liquid crystal display) screens. They provide richer colors and consume less power. Moreover, by being flexible, OLED screens could also give iPhones new form factors.
Apple probably won’t bring the technology to its iPhones until at least 2017. So don’t expect this year’s new iPhone to have OLED screens. Still, that doesn’t mean Apple stock can’t have a good run in 2016.
You see, Apple is expected to introduce the “iPhone 7” this September. While it’s more likely going to be evolutionary than revolutionary, sales could be huge.
The reason is that a lot of people bought the “iPhone 6” when it first came out in September 2014. In fact, Apple sold 75 million iPhone 6 units in the first three months the device was on the market. Many of those who bought the phone on a contract from a carrier would be eligible for an upgrade when the iPhone 7 launches this year. This upgrade cycle alone would be a huge catalyst for the company in 2016.
If Apple adopts OLED screens in 2017, it would be a huge selling point. The product may be called “iPhone 7S” or “iPhone 8.” When the company launched the iPhone 6, the biggest selling point was the larger screen. With OLED screens, Apple has the freedom to create all kinds of new designs including curved screens. And just imagine how Apple fans would respond. The lines at the Apple store are going to be very, very long.
At the end of the day, keep in mind that markets are driven by more than just fundamentals. The good news is that analysts’ opinions could start to change. Arcuri said that year-over-year comparisons and forward estimates for AAPL stock have bottomed. So in the future, there might be more bullish points for Apple stock coming out of Wall Street.
The Bottom Line on AAPL Stock
Let’s not forget Apple’s enormous cash pile. Although most of it is stored overseas, Apple’s over $200 billion of cash could translate to more dividends and share buybacks down the line. It’s not clear how soon that could happen, but AAPL stock investors could eventually be rewarded.