'Gloom And Doom' In Apple Story Has Reached Extreme Levels This Year, Says Drexel Hamilton

Drexel Hamilton’s Brian J. White believes “the ‘gloom and doom’ sentiment engulfing the Apple Inc. AAPL story has reached extreme levels this year,” and the stock represents “an exceptional value.”

White maintained a Buy rating on the company, with a price target of $185.

Apple Monitor

“As Apple enters the final months of the iPhone 6-series cycle before the iPhone 7 ramp begins, we expect weakness in the supply chain. Our Apple model estimates a bottom in the sales cycle, profit cycle and iPhone unit cycle in the June quarter,” the analyst mentioned.

All companies on Drexel Hamilton’s Apple Monitor have reported their May sales, with the performance being weaker than the historical averages.

May sales for the Apple Monitor declines one percent month on month, with a weaker-than-the-average 5 percent increase over the past 11 years.

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Hon Hai, one of Apple’s suppliers, reported an 8 percent month on month decline in May sales and a weaker than the average decline of 4 percent over the past 11 years, although better than the 14 percent decline seen in May 2015.

June Quarter

“If we assume an average MoM sales decline for our Apple Monitor this June as experienced over the past 11 years, we estimate sales for our Apple Monitor will fall by 4 percent QoQ in the June quarter,” White stated.

In addition, the revenue outlook for the June quarter also appears meaningfully below historical seasonality and weaker than the performance in the June quarter of 2015.