Does Apple Have Significant Upside Going Into 2018?

The last two weeks have been far from kind to Apple Inc. (AAPL – Free Report). The discovery that it was deliberately slowing down older iPhones in order to compensate for ageing batteries came as an unwelcome surprise to devotees of the brand. Further, reports and projections emerged indicating that iPhone X and overall iPhone sales may be lower than earlier expectations.

These events caused the stock to stutter toward the end of 2017 even though it has subsequently chalked up gains at the start of the New Year. This is not the first time that some degree of skepticism has built around the prospects of the world’s most profitable company. But for once, such concerns seem to have a solid foundation, which is why it is crucial to examine whether Apple’s stock can live up to its promise going into 2018.

Could iPhone X Sales Dip in 2018?

Apple’s stock enjoyed a strong 2017 with the stock gaining nearly 47.7% over the past one year. It is widely believed that the iPhone maker is one of the key catalysts of the current market rally along with other tech giants who make up the FAAMG group, namely Facebook, Inc. (FB – Free Report) , Amazon.com, Inc. (AMZN – Free Report) , Netflix, Inc. (NFLX – Free Report) and Alphabet Inc. (GOOGL – Free Report) .

This is why it was something of an unwelcome surprise for investors when shares of the iPhone-maker plummeted 2.5% on Dec 26 — its worst decline since August. The decline occurred after Taiwan’s Economic Daily reported that the tech-giant was planning to cut its current quarter sales forecast for the new iPhone X by 40% to 30 million units, down from the initial 50 million units. No formal statements were released by Apple on this issue.

Further, on Jan 2, CLSA cautioned that prevailing iPhone X sales projections remained unrealistically high despite a recent rollback in investor expectations. The investment bank said in a note that since fourth quarter sales expectations had dipped and first quarter 2018 figures were unlikely to pick up, investors were being overly optimistic about Apple’s stock. Analysts at CLSA feel there is little pent up demand for the iPhone X since those customers who were wanting to pick up an iPhone X in December 2017 had likely already done so.