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Apple ( AAPL ) stock has been knocked down by growth concerns in recent months. But it’s reached a level where the risk-reward balance looks attractive, Morgan Stanley analyst Katy Huberty said in a research report “Growth headwinds won’t subside in the near term,” Huberty said in a note Wednesday. “But risk/reward is attractive with upcoming iPhone refreshes, steady margins and low valuation.” She rates Apple as overweight with a price target of 135. Apple stock barely budged, closing up 0.03% at 96.38, on the stock market today . With iPhone sales poised to fall for the first time on a year-over-year basis this quarter, investors are debating the future of the business. Apple’s iPhone business faces headwinds, including a slowing China economy, price increases abroad as the U.S. dollar strengthens, fewer carrier subsidies and tough year-over-year comparisons, Huberty said. Apple’s share of the high-end smartphone market, however, still looks solid, she said. Another worry is that iPhone average selling prices and profit margins will decline, especially when Apple launches its rumored 4-inch iPhone 5SE in March. But Huberty expects the 4-inch iPhone to carry gross profit margins that are better than the company average and potentially in line to above margins for other iPhone models. She expects Apple to roll out two revolutionary iPhone features over the next one to two years that will show smartphone innovation is alive. They are foldable OLED displays and wireless battery charging. “OLED displays should allow Apple devices to offer better picture quality and become even lighter and thinner and/or offer longer battery life as OLED uses less power,” Huberty said. “Foldable OLED could enable smartphone-sized mobile devices that can open like a book to reveal a larger tablet-like screen inside.” Wireless charging will enable over-the-air charging of iPhones, Apple Watches and other devices, she said. However, foldable OLED and wireless charging are unlikely to be in the iPhone 7 due out this fall, she said. Yet even without those revolutionary technologies, the iPhone 7 should be able to drive high single-digit unit growth in fiscal 2017, which starts Sept. 25, she said. Scalper1 News
Scalper1 News