2 Analysts That See Apple Stock In 'Holding Pattern'

• Apple Inc. AAPL reported Q3 earnings ahead of expectations, but failed to impress the market.
• The company continues to deliver strong numbers but lacks near-term catalysts.
• Deutsche Bank and Cowen believe that Apple will likely be range-bound in coming quarters.

Apple is trading up modestly in Wednesday’s session after reporting Q3 earnings and guidance that beat consensus expectations. However, a pair of Wall Street firms remain unconvinced that Apple has much upside in the near-term. Here’s what they had to say.

Deutsche Bank
Analyst Sherri Scribner sees both positive and negative takeaways from Apple’s quarter. The bad news is that iPhone sales numbers in Q3 were “a bit of a disappointment.” However, the good news for Apple bulls is that the company’s new guidance implies iPhone unit growth in Q4. In addition, Scribner notes that Q3 gross margins were also a pleasant surprise.

Cowen & Co
At Cowen, analyst Timothy Arcuri was also not wowed by Apple’s numbers. He calls iPhone numbers “okay but not great.” Cowen is calling for iPhone unit growth in 2016 of about 10 million units, but Arcuri notes that this growth will not be coming from 6S/6S+ models. Cowen is projecting that the growth will come from lower-margin older models and predicts that the 6S/6S+ cycle will be the first iPhone build cycle that is down cycle-to-cycle.

Outlook
While iPhone numbers no longer seem to impress the market, Arcuri points out several exciting future catalysts for Apple, including the Apple Watch, iPad Pro, Apple TV and an electric car. However, he believes that Apple will likely be treading water for now. “The reality remains that these [catalysts] will simply take a good bit of time to move the needle,” he explains.

Scribner agrees that the stock lacks near-term catalysts and will likely be range-bound over the next few quarters.

Deutsche Bank has a Hold rating on Apple and a $125 price target on the stock. Cowen rates Apple at Market Perform with a $135 target.

Disclosure: the author holds no position in the stocks mentioned.