Image source: Apple.
It was a rough week for Apple (AAPL -0.57%) investors. Shares of the the world's leading -- and lately bleeding -- consumer-electronics company declined by 2% for the week.
That's certainly not too shabby in light of some of the Brexit-related carnage, but it was actually the Apple-related news that made it a rough week for investors. Another analyst lowered his price target on the stock, and more reports suggest that investors will have to wait until next year for a bar-raising update for the iconic iPhone.
Canaccord analyst Michael Walkley lowered his price target from $130 to $120, as surveys seem to suggest that folks are holding off on buying new iPhones until they see what the Cupertino company has cooking for the iPhone 7 in a few months.
When analysts attack
Walkley is the latest Wall Street pro to cool on Apple's ceiling. J.P. Morgan lowered its price target from $125 to $105 a week earlier, and Goldman Sachs went from $136 to $124 earlier this month.
All three analysts remain bullish on the stock, and that's important. However, they all seem to be reacting to the reality that Apple is going to have a rough couple of quarters. Wall Street's estimates calls for sharp year-over-year declines in revenue and earnings for Apple's fiscal third and fourth quarters.
It boils down to sluggish demand for the iPhone 6s, particularly in light of the blowout success of the iPhone 6 a year earlier. It may also be hard for the iPhone 7 to stand out. Unconfirmed reports continue to suggest that the iPhone 7 will offer the same form factor and just modest feature updates to last year's uninspiring iPhone 6s. Most of the media attention is concentrating on reports that Apple will do away with the headphone jack on the updated device. The new earbuds would connect to Apple's proprietary lightning cable port, a move that could make the device more water-resistant. Users would also be able to use Bluetooth headphones.
Game-changing upgrades will apparently have to wait next year. That's when bloggers now expect Apple's inevitable screen switch from LCD (liquid crystal display) to OLED (organic light-emitting diode) may have to wait until next year, a pretty big deal since that will be the 10-year anniversary of the landscape-redefining smartphone.
OLED would allow Apple phones to be thinner and more flexible. It would also make the display more power-efficient, something that increases the all-important battery life.
Between Apple's seeming push of major upgrades to a three-year cycle and the shift by all of the major U.S. carriers to end the subsidization of smartphone purchases, the appetite for consumers to upgrade every other year is waning.
That doesn't mean Apple is in trouble. It has more than $230 billion in cash and marketable securities on its balance sheet, and it has a track record of innovating just when the market thinks it's out of tricks.
The boo birds, however, are certainly out there. There were 99.7 million shares of Apple sold short by the end of last month, the stock's highest short interest since late last year. The number of bearish bets would shrink by mid-June, but they're still at a high level.
Apple stock has lower sales, earnings, and price targets to hit these days, but it can't afford to miss. The stock had its first down calendar year since 2008 last year, and it's already in the hole through the first half of 2016. The market's cooling on Apple, but you might not, given the cheap earnings-based valuation and the prospects for a turnaround to materialize in fiscal 2017.
This isn't Apple at its best, but it's hard to bet against seeing the tech bellwether bounce back.
