Barclays Lowers Apple Price Target To $142, But 'Franchise Value Remains Intact'

• Apple Inc. (NASDAQ: AAPL) shares have been under pressure and are down 7 percent since December 28.
• Barclays’ Mark Moskowitz maintained an Overweight rating for the company, while reducing the price target from $150 to $142.
• Apple’s results and outlook were better than feared, and the stock is attractive for long-term investors, Moskowitz stated.

Apple’s December quarter results and March quarter outlook were both better than investors had feared. Analyst Mark Moskowitz noted, however, that Apple’s commentary on weak global economic conditions could exert pressure on the stock in the near term.

Terming Apple as the “Top Pick in IT Hardware,” Moskowitz said that any near-term weakness in shares would make the stock attractive for long-term investors.

While many are concerned about the implied 10-20 percent decline in March quarter’s iPhone units, the analyst believes that a combination of “stout ASPs, market share momentum, and sturdy gross margin” suggest that Apple’s iPhone franchise would be able to deal with tough comps heading into the second half of 2016.

The next potential catalyst would be the iPhone 7 prototypes coming up towards the end of the March quarter. Expanded capital allocation in the June quarter should also be a catalyst.

In the report Barclays noted, “As the model laps in tough comps, we think the iPhone 7 should help refocus investors on the market share gain potential, regional penetration opportunities, and emergence of a broader services platform that should provide enough levers to return to above-peer revenue growth, notably in C2017.”

The iPhone unit estimates for C2016 and C2017 have been revised to 237.6M and 252.6M, implying growth of 2.6 percent and 6.3 percent, respectively.