Apple's Stock Enters 'What's Next' Phase

After months of anticipating the release of the 10-year anniversary iPhone X, the big date finally came this month for Apple Inc. AAPL investors. But now that the iPhone X is finally here, Wall Street analysts are already asking a critical question: what’s next?

The Analyst

Wells Fargo analyst Aaron Rakers has resumed coverage of Apple with a Market Perform rating and $195 price target.

The Thesis

Rakers is cautious of Apple stock after it ran up roughly 50 percent in 2017 ahead of the iPhone X launch. Without clear near-term catalysts beyond the X, Rakers sees limited upside to Apple stock.

“We think the shares could now see increased volatility, with a focus on incremental derivative demand and mix data points over the coming months, supply versus demand achievement (i.e., expectation of continued chasing demand into March 2018 quarter?), and upgrade and Android switcher rates,” Rakers said in a Wednesday note.

Wells Fargo is calling for 81.2 million iPhone unit sales in the December quarter, including 60.1 million iPhone 8, iPhone 8 Plus and iPhone Xs.

Outside of the iPhone cycle, Rakers said U.S. tax reform is critical for Apple. If Republicans agree to a 12 percent repatriation rate, Rakers said Apple will likely repatriate all of its $252 billion in cash stored overseas, and investors will be on the lookout for increased capital return and/or potential M&A opportunities.

Even with a blowout iPhone X sales cycle, it will only be a matter of time before Apple naysayers once again start questioning the company’s innovation by asking what’s next. This level of uncertainty is enough to keep Wells Fargo on the sidelines at this point.

Price Action

Apple’s strong 2017 has continued this month with the stock up another 2.3 percent in November.

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