Apple

Analyst Predicts Apple Shares Will Slump Over Next Year

Apple

One analyst is predicting that Apple’s shares will slump 6 percent from last week's close to $175 over the next 12 months.

According to CNBC, a look at recent average selling prices for iPhones, as well as soft demand for iPhone X, led to the prediction.

"iPhone volumes are not deteriorating, though iPhone X remains uninspiring," analyst Jeffrey Kvaal said in a note to clients. "Apple guidance implied third fiscal-quarter iPhone unit volumes that were better than feared. We do not believe, however, sell through has meaningfully improved."

Kvaal kept his neutral rating on Apple shares, adding that a decline in phone upgrades has played a major factor in the iPhone X's disappointing sales. In fact, the average upgrade rate at major U.S. telecommunication companies fell to 5.3 percent in the first quarter of the calendar year.

"We see little reason for [the upgrade rate] to improve in the near term," he added. "None of the carriers appear particularly distraught by the lower gross adds — and lower churn — that accompanies the lower upgrade rate. Verizon expects to remain disciplined and Sprint also expects to be less promotional."

Kvaal added that analysts would be better able to make an assessment if Apple were more transparent about its revenue generation. And while services revenue – licensing, App Store and AppleCare, for example – has consistently grown above 20 percent annually and shares have gained roughly 10 percent this month, Kvaal isn't convinced.

"Apple has made several sustainable improvements to the services growth trajectory," he said, "[but] we believe the tailwind from licensing and from AppleCare may ease in coming quarters … we would appreciate better disclosure from Apple on its services business to help gauge revenue growth."

As of Friday (May 18), the stock's price was $186.31 for a market cap of $915 billion, and within $20 of making Apple the first company to reach a value of $1 trillion. Shares were up 1.3 percent on Monday morning (May 21).

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