Credit: Shutterstock photoShares of Apple (AAPL) have fallen slightly over the past few months, declining nearly 2% since the company last reported earnings.
That weakness isn't likely to persist, according to an analyst from research firm Societe Generale, noting investors should take advantage of the pullback.
Analyst Andy Perkins upgraded shares to buy from hold, keeping his $140 price target on shares, noting that the iPhone likely did better than first estimated this quarter. "We have upgraded our iPhone forecast volumes to 48 million (from 43 million) at an ASP [average selling price] of $646, slightly down on the previous quarter due to higher European sales (the European iPhone ASP is more than $100 below the U.S. ASP)," Perkins wrote in the note. "Our detailed breakdown shows that China has become even more crucial for Apple, with iPhone sales almost 30% of the total, exceeding US sales for the second quarter in a row."
Since the start of 2015, Apple shares have gained 11.7%, outpacing the 5.5% gain seen in the broader Nasdaq.
Perkins also stated that the Apple Watch, whose sales have been the subject of much debate lately, sold 5 million units in the quarter, at an average selling price of $500, good for an additional $2.5 billion in revenue.
The importance of China is becoming ever greater to Apple, with the world's most populous country accounting for nearly 30% of its iPhone sales, according to Perkins. Investors need to keep in mind any slowdown happening in China, Perkins noted.
"Our work suggests that iPhone sales in China outpaced those in the US for the second quarter in a row and represented 30% of iPhone sales," Perkins wrote in a note. "Obviously any slowdown in the Chinese economy, whether or not stemming from the recent stock market turmoil, could have an adverse impact on Apple’s sales. However, currently we have not factored in any slowdown in iPhone sales. We therefore maintain our long-term targets."
Apple has several upcoming catalysts, including the launch of the new iPhone (expected to take place in September), the continued success of the App Store, a revamped Apple TV set-top box along with its own television streaming service, a new iPad and perhaps more.
With the recent drop in price as well as the aforementioned catalysts (not including strong earnings), Perkins foresees a 15% total return over the next 12 months for shareholders.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
