Will The New iPhone Win Over Wall Street?

Apple’s stock has been in a slump, changing hands at a psychologically important $100 level. Will a new phone help change investor moods from sour to sanguine?

Reuters reported Wednesday (March 9) that the roller coaster highs and lows have taken the name to levels that, on a valuation basis, are near those of the more sedate IBM, which can hardly be called a growth company.

But the stock has come up a bit, by 5 percent in the past two weeks, with excitement tied to a launch this month of an iPhone that is relatively less expensive than earlier models and which may make inroads into China — a country that is essential for growth.

Amid that backdrop, some proponents defended the valuation and positioning of the company. In an interview with the newswire, Daniel Morgan, senior portfolio manager at Synovus Trust Company, holding more than 1 million shares of the stock, said: “This company has a history of doing better than expectations and surprising people. Where else can I go and find a company trading at 10 or 11 times earnings that has had such a great history?” Average forward earnings ratios have been in the low teens for the company. And, as Reuters noted, a 15 times multiple would push the company’s stock price to $138. Sentiment is still high on the name, with 38 analysts on The Street still rating it a buy.

The new phone will sport a smaller screen, and sales volume is expected to grow by roughly 5 percent this year, with an attendant revenue boost not factored yet into expectations. One tell might be chip supplier Dialog Semiconductor, which earlier in the month said that March quarter revenues might be below consensus. However, growth forecasts through the rest of the year may be hinting at growth in iPhone shipments.