Apple Inc. (Nasdaq: AAPL) stock is down 8.7 percent in the past month after the iPhone X "supercycle" turned out not to be as super as investors had hoped. While there may still be long-term value in Apple stock, Goldman Sachs analyst Rod Hall says investors shouldn't be in a hurry to buy.
Hall says the weakness in iPhone unit sales that weighed on Apple stock following its fiscal first-quarter earnings report will remain an albatross for Apple stock for at least two more quarters.
"In particular, we see downside to consensus iPhone revenue forecasts in the June quarter and believe shares are unlikely to outperform while risk of estimates revisions remains," Hall says.
Hall says there are still plenty of things to like about Apple, especially the financial flexibility the company will have in 2018 once it repatriates nearly $200 billion in cash. However, it's unclear whether or not a higher dividend payout, more share buybacks and potential mergers and acquisitions will be enough to overcome the impact of softening iPhone sales.
Goldman is particularly optimistic about the potential for an aggressive dividend hike that could take Apple's yield from 1.5 percent to above 3 percent, putting the stock among the 10 highest-yielding Dow Jones components.
"Beyond June, we see a path for earnings and share price improvement, but believe investors will look for confidence that estimates have bottomed, which may not occur until fiscal 2019," Hall says.
GBH Insights head of technology research Daniel Ives says long-term investors who are willing to endure short-term turbulence in the stock shouldn't hesitate to buy Apple at current levels.
"Seeing the forest through the trees, we estimate Apple has roughly 350 million iPhones that are in the window of opportunity to upgrade over the next 12 to 18 months, now it's about which model and price point 'strike a chord' for these customers to ultimately upgrade as the iPhone X demand has softened since reaching a supply/balance level in late December," Ives says.
Goldman Sachs has a "neutral" rating and $161 price target for Apple. GBH Insights has a "highly attractive" rating and $205 target for AAPL stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at firstname.lastname@example.org.