Apple Inc. stock is trading at record highs, but at least one analyst thinks talk of a “super cycle” and mounting excitement for the next iPhone are getting out of hand.
Deutsche Bank’s Sherri Scribner raised her 12-month price target on the stock Tuesday morning to $125 from $115 to reflect the recent run-up in shares. However, she maintained a hold rating on Apple
stock, and cautioned that expectations for the iPhone 8, expected to have new 3-D technology that could enable augmented reality, may be climbing too high.
While the market continues to price in optimism about a potential “super cycle” surrounding Apple’s 10th anniversary iPhone—because of both form-factor upgrades and the record number of older-model iPhones in use that may inspire an abnormally large upgrade cycle—Scribner believes elevated expectations could set up investors for disappointment.
“Contrary to the market optimism calling the iPhone 8 a super cycle, we caution that it might outsell its predecessors only marginally, due to the high price,” she said. “We remain more cautious, given slowing global smartphone growth, elongating refresh cycles and the expected high price of new models.”
According to media reports citing supply-chain leaks, Apple is expected to unveil three phones in September: two nearly identical phones with screens of different sizes, and one superpremium phone that would be priced above the larger-screen “Plus” model with a lion’s share of the new features.
To support her point of view, Scribner pointed to recent supply-chain checks. Total iPhone production is forecast to be 134.5 million in the second-half of 2017, which would represent a 5% year-over-year increase from the same six months in 2016, according to data provided by Deutsche Bank.
While that is an improvement from last year’s iPhone 7 supply chain shipments, which fell 12%, Scribner said it’s a “significant deceleration from past years” when production increased closer to 20%.
It’s a “far cry from what many are calling a ‘super cycle,’” she said.
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Other analysts remain optimistic, however. Separately on Tuesday, Morgan Stanley’s Katy Huberty said she thought China, a laggard for Apple in recent quarters, could contribute disproportionately to Apple sales in fiscal-year 2018, which begins with the release of the iPhone 8.
“China users are especially sensitive to new technology and for factor changes,” Huberty said.
Shares of Apple gained 0.7% to $136.70 Tuesday, the company’s fifth record close in the past six sessions. Apple shares have increased 22% in the past three months and 42% in the past year, outperforming the Dow Jones Industrial Average
, a 30-member index that includes Apple. The Dow is up 9% in the past three months and 26% in the past year.
Deutsche Bank is one of just 10 brokerages with the equivalent of a hold rating on Apple stock out of 44 tracked by FactSet. The average rating is the equivalent to buy and the average price target is $141.78, according to FactSet.