Apple (AAPL) Weakness Unjustified, Oppenheimer Says

Oppenheimer analyst Andrew Uerkwitz came out in defense of Apple (NASDAQ: AAPL) with shares down 12.5% since its recent high of $132 following quarterly results. The firm reiterated its Outperform rating and $155 price target.

Uerkwitz believe the weakness can be attributed to fear over decelerating iPhone growth, a slowing Chinese economy, and lack of new growth drivers.

"We believe discounting Apple based on these concerns is unjustified," the analyst said.

The analyst highlighted the following:

• China Market Potential - "We believe the iPhone's growth in China is not over. We estimate that China's iPhone installed base will surpass that of the US in 2015 while maintaining above-market Y/Y growth. We see market dynamics in the Chinese market that favor Apple's stability, user interface, and ecosystem over Android's price, openness, and flexibility."
• Android Switchers- "We have been arguing that the high-end Android market will continue to deteriorate. And we expect the same iOS share gain story in China to proliferate in other high-growth, low-penetration emerging markets at the same time as smartphone users become more sophisticated and richer."
• Service Revenues - "We believe that Apple's Service revenues are overlooked as a future revenue and profit driver. We expect a quickly expanding installed base in emerging markets will make service revenues the fastest growing segment in Apple. Also, we see new services such as Apple Music adding substantial upside."
• Supply Chain Insights - "The smartphone supply chain has been suffering since 1Q15, and the outlook into 2H15 remains bleak. However, by looking at names with heavy Apple exposure, we conclude that Apple's 2H15 will outperform the overall market and show little impact from the macro weakness competitors are seeing."

Meanwhile, the analyst said the biggest risk to their bullish thesis is a major shift in tech investor sentiment, from smartphone-centered names to internet-centered names. He said the stock may lose supporters to Netflix, Google, Amazon, and Facebook

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $115.52 yesterday.

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