For Immediate Release
Chicago, IL - August 06, 2015 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Apple Inc. ( AAPL ), Google ( GOOGL ), IBM Corp. ( IBM ) and Amazon.com Inc. ( AMZN ).
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Here are highlights from Wednesday's Analyst Blog:
Apple Shares Down 10%, Time to Buy?
Apple Inc. ( AAPL ) has been witnessing a downtrend recently. Its shares declined nearly 3.7% in Tuesday's trading and were 15% below its all time high of $134.54 set in April this year. Apple is down around 9% over the past one month, which leaves investors with the scope to add position.
Despite the current downtrend, Apple has gained nearly 20% in the past one year and 2% in the year-to-date time frame compared with around 4% for S&P 500. Also, despite iPhone-related concerns in the last earnings report the company continues to generate solid cash flows, leading us to conclude that the current bearish movement is a temporary correction in prices. We believe this is the time to buy the stock.
Apple reported impressive third-quarter fiscal 2015 results with earnings of $1.85 per share (up 44.5% year over year) on strong revenues from iPhone and Mac sales, higher services revenues and sales of Apple Watch. Further, the company's revenues grew 32.5% year over year as demand for Apple's products remained strong across all geographical regions. The company also gained significantly from Greater China, one of its key regions. Revenues from this market soared nearly 112%.
We believe that one of the concerns for Apple investors could be its sequential performance. Although Apple reported significant year-over-year growth, its flagship product - iPhone - reported lower sales than the Street consensus and also dropped sequentially. As Apple has captured most of the matured markets and its Far East venture has also yielded significantly post the iPhone 6 and 6 Plus launch, it can be said that the company has capitalized on its iPhone 6 growth opportunity to a large extent in the second quarter of fiscal 2015.
It remains to be seen whether the company can increase the conversion/upgrade rate of its users to its newest models to increase sales volume. Reportedly, Apple is also witnessing a significant shift of users from Google's ( GOOGL ) Android to iOS. The company stated that in the third quarter of fiscal 2015, it recorded the highest Android switch rate.
We believe that Apple has a strong position in the smartphone market, especially in its home turf - U.S. However, in the U.S., the company has recorded more iPhone-to-iPhone upgrades than Android-to-iPhone switch, as per market reports. And its overdependence on the iPhone creates uncertainty over the stock.
Hence, we believe the company's focus on emerging markets like China is crucial. It is poised to benefit from users switching to its devices from Android phones in the region. While the company is not a top selling smartphone maker in China, it has around 12.2% market share following Xiaomi's 15.8% and Huawei's 15.4%. The company managed to garner 25% of its total sales from Greater China. While Apple sales might slide sequentially in this emerging market, we still believe there is plenty of room for growth.
Further, we believe that Apple's partnership with IBM Corp. ( IBM ) is also important. Not only does it attract the enterprise market with customized apps from IBM but it also remains a key strategy to boost iPad sales. While iPad sales have been declining over the past quarters, we expect the company's tie-up to boost sales in the near future.
While Apple remains a growth stock, its future hinges upon constant innovation of products and services. While the company played its Phablet card well with the launch of iPhone 6 and 6 Plus, the success of Apple Watch is hard to determine.
Since the company has historically bounced back from its bearish trend and touched new highs, we expect a similar trend this time as well, especially given its strong financials and the demand for its products and services.
Apple currently has a Zacks Rank #2 (Buy). Another stock worth considering in the technology sector is Amazon.com Inc. ( AMZN ) with a Zacks Rank #1 (Strong Buy)
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