Despite Apple Inc.’s (AAPL)’s declining iPhone sales, there are still plenty of reasons to like the company that’s according to Bank of America Merrill Lynch’s hardware analyst Wamsi Mohan. After last week’s earnings release the Bank of America Corp (BAC) analyst, reiterated his ‘buy‘ rating on the company’s stock and highlighted ten reasons why investors should own the company despite concerns about its future.
Apple beat Wall Street estimates, reporting earnings per share of $1.42 per share on revenues of $42.4 billion down from the comparable year-ago figure of $1.85 per share on $49.6 billion in revenue. Quarterly profit fell 27%. Apple said it sold 40.4 million iPhones during the three-month period, compared with sales of 47.5 million units a year earlier breaking an eight-year run of growing iPhone sales.
The Wall Street Journal reports that in an interview after the earnings report was released Apple Chief Executive Tim Cook said:
“iPhone demand was better than the sales figures showed, because it reduced inventory of the smartphone by more than four million units in its retail channels. He said he also was encouraged by iPad revenue returning to growth for the first time in 10 quarters and the continued strong growth in revenue for Apple’s services.”
Wamsi Mohan estimates that sell-out trends reflect an 8% year-on-year decline in iPhone units and given the assumptions around launch timing of the iPhone 7, for the September quarter a sales contraction of 7% year-on-year is projected — a marginal improvement from the June quarter and down 3% quarter-on-quarter.
Ten Reasons to Buy AAPL
So, it’s assumed that Apple’s iPhone sales are going to decline from the rest the year even after adjusting for the launch of the new model. But despite slowing iPhone sales Bank of America is still positive on the outlook for Apple, and there are ten reasons why Wamsi Mohan believes the reported second-quarter results weren’t all that bad:
“(1) less than feared impact from mix of iPhone SE to gross margins, (2) iPhone sell out declines moderating, (3) Switchers into ecosystem remain strong and span across models beyond SE, (4) iPhone ASPs set to improve at least in the near term, (5) channel inventory at low end of range, (6) new iPhone introductions likely on Sep 16th, (7) services revenue growth strong into F17, (8) gross profit dollar growth has likely troughed in the June qtr, (9) capital return continues and (10) iPad returned to revenue growth after 9 quarters of declines.”
Bank of America has a price target of $120 per share on the stock and expects the company to report earnings per share of $8.27 for full-year 2016.
The price target is based on a multiple of 12 times earnings of $9.94 per share for full-year 2017.
Further, the bank’s tech analysts believe investors shouldn’t underestimate the potential launch f the Apple Watch 2 and upgrades driven by the software capabilities enabled by the more feature rich iPhones.
