Is Investors’ Love Affair with Apple Over?

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The worst-performing stock among the Dow 30 on Friday was Apple Inc. (NASDAQ: AAPL). The shares dropped 4.1% on the day and more than 5% for the week. Only IBM and P&G had a worse week

The stock price is up more than 16% over the past 12 months, but for the year to date shares are off just over 2%. Is the stock on its way up or on its way down? Is Apple stock a value or a value trap?

Last week analysts and investors seemed to be worried about demand for the top-of-the-line iPhone X. Analysts at Morgan Stanley, for example, cut its forecast for iPhone shipments by 1 million units in the quarter that just ended and by 6 million for the current quarter. For the full year the analysts’ estimate has dropped from 217 million to 210 million.

That’s the bad news. The good news is that the Morgan Stanley analysts think that the current share price is a buying opportunity that may only get better after the company reports earnings on May 1. If the shares slip after earnings are released Morgan Stanley says the company is likely to boost returns. That means investors could look for a dividend increase or a share buyback or perhaps even a special dividend.

After all, Apple is sitting on a mountain of cash and there has been plenty of speculation on how it might spend it: buy Netflix; buy Tesla; buy GE (just kidding).

One other topic that came up last week was a cheaper iPhone that would be more competitive in the Chinese market. Respected Apple analyst Ming-Chi Kuo at KGI Securities thinks the company will come up with a new phone that includes a 6.1-inch LCD display (not the more expensive OLED screens) that would offer support for dual-SIMs at a retail price of just $550. The dual-SIM feature is useful for people who travel all over the world and don’t want to carry two phones. But that doesn’t seem like a “must-have” in a cheaper iPhone for China’s domestic market and may be offered as an option that costs anywhere from $100 to $200.

The current consensus estimates call for second fiscal quarter (ended in March) earnings per share (EPS) of $2.69 and revenues of $61.08 billion. Those estimates represent an increase of 28% to EPS and a boost of 15.5% to revenues. For the current quarter, analysts are looking for EPS of $2.18 and revenues of $52.14 billion, a 30% year-over-year increase in EPS and nearly 15% more revenue.

Apple stock closed at $165.72 on Friday, down 4.1% for the day in a 52-week range of $142.20 to $183.50. The 12-month consensus price target on the stock is $193.02.