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Apple Inc. (AAPL): Why This Analyst Still Has ‘Hold’ Rating With $125 Price Target

Apple Inc. (NASDAQ:AAPLis all set to report its quarter earnings later today. But most of the analysts and investors expect Apple Inc. (NASDAQ:AAPL) to break all the expectations and come out with flying colors in this quarter yet again. Apple Inc. (NASDAQ:AAPL) stock has received many upgrades and increased price targets from many firms in the last few months. But, Deutsche Bank’s Senior Technology Analyst, Sherri Scribner still has a ‘Hold’ rating on Apple Inc. (NASDAQ:AAPL) stock with a price target of $125. Apple stock is already trading above this price target. Scribner talked on CNBC about the explanation behind her firm’s rating on Apple stock and her outlook for Apple’s earnings report.

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What addition announcement can be expected from Apple, which owns one of the most profitable businesses ever, during the earnings report later today? Scribner thinks that Apple might increase the share buybacks by an additional $30 billion. She said that company has already had a huge buyback plans, and she thinks that we might expect some incremental difference numbers, which she expects to be around $30 billion. Apple stock went up by around 2.5% as it started trading on Monday. But why Scribner’s firm still has a ‘Hold’ rating with $125 price target on Apple stock?

“I think we are definitely going to have a very good iPhone quarter, this quarter, similar to what we saw in December. But from here the growth in terms of the iPhone numbers get harder and harder. We are going to see decelerating growth and really the big part of the refresh happened in December and this quarter starts to wane,” Scribner said.

As the iPhone sales starts wane off for Apple, they expect the other products like Apple Watch and Apple Pay to pick the stock from there. But both Apple Watch and Apple Pay are not revenue generating products yet for Apple. Scribner feels that Watch is a great product and she thinks that it is doing really well. She said that it is hard to understand the supply vs. demand for this product.

Cantor Fitzgerald’s Brian White has talked big about Apple watch and set a price target of $188 for Apple stock. White lauded Apple Watch as a home run product. But this is completely contrasting from Scribner’s price target of $125 on the stock.

Scribner said that the expectations for number of iPhone sold and Apple Watch success doesn’t differ between her and White. But she feels that difference comes in the valuation. She feels that penetration that the Watch get might be very different from what the iPhone got. She said that her firm assumed that only 20% of iPhone users will adapt to Apple Watch over the next three years.

Disclosure: None

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