8:10 AM, Jan 2, 2019 — Apple (AAPL) is more than just iPhones.
Investors have been heavily focused in the past couple of months on “soft” demand for the company’s phones, but “we think that in an increasingly risk-off environment, Apple with its strong balance-sheet, aggressive buyback, and ability to drive GMs higher remains a core large-cap tech holding,” RBC analysts said.
Analysts led by Amit Daryanani said in a report that there are several questions that could affect the stock in 2019 and beyond.
It’s possible that the company will rethink segmentation during the next cycle, the bank said. If demand for iPhones is closer to a bear scenarios, that could call into question Apple’s pricing power.
On a happier note, the company could launch a new streaming service after announcing “sizable” investments in content last year, which may suggest its intentions go beyond bolstering its Apple Music user base, RBC said. Still, the key is about implementation.
Capital reallocation also is possible as the company can’t seem to time the market. The question, the analysts said, is whether repurchases made at peak levels causes management to rethink or tweak capital allocation, especially if the stock remains depressed for a few quarters.
Still, the company’s low stock prices creates an “attractive” jumping-on point for investors who want to benefit from its ability to generate revenue and earnings growth, the bank said.
“We believe multiple catalysts remain as the company benefits from iPhone ramps; Mac/iPad refresh cycle; potential iTV launch or other major product lines; and improvements in capital allocation policy,” RBC said. “We believe the fundamental reality remains that Apple’s valuation is materially sub-par to what we anticipate is its long-term revenue and EPS potential.”
Companies: Apple Inc.
Price: 154.54 Price Change: -3.31 Percent Change: -2.10