How To Trade Apple's iPhone X Event: Near-Term Risk May Give Way To Outperformance

Apple Inc. AAPL, which has behaved fairly predictably during the last five iPhone announcements, may be facing a greater near-term downside risk with the release of the iPhone X, though the stock likely will outperform over the next six to 12 months, a UBS analyst predicted Tuesday.

Steven Milunovich set a price target of $180 and rated Apple a Buy. It was trading largely unchanged at $160.74 at last check. Apple's unveiling of its latest product line is scheduled for Tuesday at 1 p.m. ET.

Apple’s Uncanny Consistency

Milunovich said in the past, Apple has been down two weeks before an iPhone launch, up a percentage point or two when the phone becomes available about two weeks later, then weak after the launch, then up again when earnings are announced.

He made three predictions:

1. “We expect (iPhone X) entry pricing may be lower at $900 than some think or at most $1,000—it is easier to argue for higher earnings with a higher ASP though we think this overlooks the potential negative demand effect of a high price.”
2. “There might be concerns regarding OLED availability or whether facial recognition (Face ID) works as well as Touch ID.
3. “The stock is up an unusually strong 37% year to date and technically now is slightly down from an overbought position. A new Watch and Apple TV along with HomePod commentary probably won't have much impact unless there are surprises.”

Related Link: Importance Of IPhone X: Apple Has Moved The Market Before