Apple Investors Shouldn't Get Carried Away With Hopes For iPhone 8

Analyst at Barclays are expecting shares of Apple Inc. AAPL to trade sideways in the near-term and cautioned investors not to buy into any iPhone 8.

Barclays' Mark Moskowitz commented in a report that Apple's earnings report and guidance indicates a lack of upside. Specifically, iPhone sales in the quarter fell short of expectations and management's June quarter revenue outlook implies an earnings per share of $1.53, which is short of the $1.62 per share analysts were expecting.

The analyst also noted Apple's capital allocation update was "nice and expected" but the rate of change is "lower" and could soon "raise the specter of potential increase in M&A down."

iPhone Outlook

Moskowitz stated that Apple's iPhone units miss in the quarter doesn't set the stage for a double-digit year-over-year growth in either units or revenue later this year.

By region, iPhone sales in the U.S. and EMEA were "health" but China's 14.1 percent year-over-year decline marks a worsening of trends from last quarter's 11.6 percent decline. In fact, given an easier compare in the recent report for Greater China, the analyst believes Apple's results might indicate the region isn't "healthy enough" to support a massive demand recovery later this year with a new iPhone.

Bottom line, the analyst argued Apple's stock has benefited from expectations for an iPhone 8 "megacycle" but expectations may be overplayed. Also, the analyst is concerned the company's gross margin could be at risk if Apple loses any market share momentum from rivals including Samsung's S8 flagship.

See Also:

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Cramer: People 'Don't Care' If iPhone Sales Are Low