Why Near-Term Noise in Apple will Give Way to Continuing Long-Term Opportunity

Robert Baird issued a report on Apple Inc.

giving the company's positive and negative catalysts heading into the new year. Currently, Robert Baird rates Apple as Outperform and lowered their price target from $155 to $150. Regarding positive sediment surrounding Apple, William Power wrote, "With only 30 percent of the global installed iPhone base having upgraded to the iPhone 6 or 6S, we believe the upgrade opportunity for 6S and 7 remains significant...In fiscal ‘17, we expect iPhone unit growth to reaccelerate to 7.0 percent." Baird also highlighted that Apple increased its capital return program from $130 billion to $200 billion, including an 11 percent dividend increase. Analysts believe that the Apple Watch has the potential to become a key contributor in Apple's product line while financially the company has been growing free cash flow consistently due to strong revenue growth and high margins. Powers did, however, highlight negatives for Apple going forward including concerns over the company's dependency on the iPhone to total revenue, gross margin pressure from sales of their iPad mini and iPhone 6, and inventory risk. Baird also believes that because Apple sells discretionary items they could be hurt by potentially weakening economic conditions. However, Baird expects strong FQ1 earnings results and sees Apple continuing to show strength going forward due to a strong iPhone outlook and growth opportunities abroad, particularly in Asia. Apple Inc. closed at $110.49 on Tuesday, down 1.77 percent.