Barclays On Apple Cut: Keep Calm, Investors

• Shares of Apple Inc AAPL have lost 11 percent in the last 6 months, even after crossing the $130 mark on July 20.
• Barclays’ Mark Moskowitz maintained an Overweight rating on the company, while reducing the price target from $155 to $150.
• Although the company’s long-term growth prospects remain intact, it could witness some weakness in 2016, Moskowitz stated.

Although Apple is well positioned to generate nearly 10 percent earnings growth in the coming years, it is likely to face several temporary speed bumps in the future, analyst Mark Moskowitz mentioned.

The company’s long-term growth is expected to be driven by the launch of iPhone 7 in late 2016 and early 2017, share gains in the smartphone market, increasing international penetration and the establishment of more services including cloud.

Downside risk to iPhone unit shipments in 1H16 is expected to restrict Apple’s near-term performance. While December quarter iPhone unit sales are tracking well, the March quarter figures are likely to be weaker, Moskowitz commented.

Research inputs indicate iPhone assembly build levels of 78-78 million for the December quarter and 45-47 million for the March quarter, the Barclays report mentioned. Accordingly, the iPhone unit sale estimates for the December quarter have been raised from 73.6 million to 75.3 million, while that for the March quarter have been reduced from 60.5 million to 57 million.

The EPS estimate for 2016 has been reduced from $10.41 to $10.05.

Moskowitz believes that Apple’s above-trend revenue and earnings growth, renewed pricing power in iPhone and expanding market opportunities through Apple Watch and iPad Pro should boost the stock’s valuation multiples in the future.