Raymond James Lays Out 3 Reasons To To Stay On Apple's Sidelines... For Now

Investors who are bullish on Apple Inc. AAPL ahead of what could be a notable cash return to shareholders may want to re-consider their thesis, according to Raymond James.

The Analyst

Raymond James' Chris Caso resumed coverage of Apple's stock with a Market Perform rating and no assigned price target.

The Thesis

Apple's outlook remains favorable and the company can see growth despite the iPhone supercycle falling short of expectations, Caso said in a note. There are three reasons why investors shouldn't be aggressive on the stock just yet, however.

Cash Already Known

One of the most notable thesis for being bullish on Apple's stock is expectations for a large cash return program in April, the analyst said. But this is already a "well-known catalyst" and the magnitude of the program is already known to be $163 billion the company's annual cash flow. The company's buyback program would more than double its three-year earnings per share compounded annual growth rate to 31 percent at today's stock price, but the fiscal 2019 P/E multiple would fall from 13 times to 10 times. Most investors have already "done that math" which reduces its impact as a notable catalyst.

iPhone ASP

The Street revised their collective estimates on Apple to a more reasonable level, but there are some near-term risks to iPhone's average selling price assumptions, especially at a time when the iPhone X inventory needs to be "drained from the channel."

New Models

Apple is likely to introduce three new high-end iPhone models in the fall season, which gives the company the opportunity to better align the price point to match demand, Caso said. For the time being, at least "no such visibility" into the company's plans exists.

"Net, after a strong run in the stock in anticipation of a supercycle that didn't occur, we think we have time to wait before reloading for another cycle," the analyst said.

Price Action

Shares of Apple were trading higher by 0.6 percent Friday morning.

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