Why Cowen Is 'Still Holding Off' On Apple

Cowen & Company released its latest equity research report on Tuesday, lowering their price target on Apple Inc. AAPL to $130.00 from a previous price target of $135. The research firm has a Market Perform rating on Apple.

"While we remain apathetic on iPhone units and CQ4/CQ1 builds have been cut ~5MM units, investor expectations around March guide may finally be too bearish," the firm commented.

Why Cowen Is Holding Off

"While the stock is closing in our $100 "trigger" price, the bias to estimates remains to the downside through at least mid-'16 as growth expectations are normalized following the demand pull-ins on 6/6+ and more "normalized" run-rate in China following the simultaneous launch this time around," analysts added.

The firm forecasts that the iPhone 6C should provide some cover for June '16 Q, however they see the units as likely to cannibalize sales of price-reduced 6/6+.

"It is simply no longer blasphemous to say iPhone units will likely decline Y/Y in C2016 and expectations for March have come in a lot, but the builds for March are simply too low to make us feel that Street numbers are safe for FQ3:16(Jun)," the firm noted.

The research firm had a summer downgrade of Apple based on its supply chain work. "6S/6S+ builds/units were, for the first time, down cycle to cycle making," Cowen added.

Apple had been more reliant on lower price points to drive its unit growth.

"In recent months, competitors far and wide have cut numbers on similar supply chain work. From where we sit at this juncture, our recent work does support an incremental cut in builds of~5MM units for both CQ4 and CQ1; even so, however, we still think sell-in should below to mid 70MM's for FQ1:16 (Dec) and low 50MM's for FQ2:16 (Mar)," the analysts commented.