The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.



Apple Stock Forecast

Summary:

Apple’s stock price performance is dependent on iPhone sales. The upcoming release of the iPhone 7 next month is again its biggest stock mover.

I opine that even without a major upgrade/improvements, the iPhone 7 will outperform the sales of the iPhone 6s.

The majority of iPhone loyalists are still unaware that Tim Cook has shifted to a 3-year refresh cycle for the iPhone.

Most iPhone 6 users who ignored the iPhone 6s are therefore likely to upgrade their unit to the iPhone 7 this year.

A better-than-iPhone 6s sales performance from the iPhone 7 will boost AAPL’s stock.

I Know First’s algorithm is currently bullish on AAPL

We all know that Apple’s (AAPL) stock price moves accordingly on what the company reports over its iPhone sales. I, therefore, encourage investors to go long on AAPL prior to the release of the iPhone 7 next month. Basic psychology tells me that institutional and retail investors will be more enthusiastic in boosting AAPL’s stock price beyond $115 the next few months.

Below is a leaked image of the iPhone 7. This handset is definitely getting launched next month.

(Source: Weibo/TechTastic)

Yes, the iPhone 7 will not be a major refresh design over the iPhone 6. I already discussed this issue at Seeking Alpha that Apple has moved from a 2-year to a 3-year refresh cycle for its phone product. The thing is that ordinary buyers (not investors/industry analysts) like the hundreds of millions of iPhone loyalists do not really know about this shift to prolonged redesign cycle for the iPhone.

The old cycle was that Apple issues major iPhone models every two years. The iPhone “S” variants are the yearly minor models. The iPhone 6s’ sub-par sales performance will not be the same with the iPhone 7. The iPhone loyalists still think the iPhone 7 is a handset with a major redesign. They will again treat it like how they treated the record-setting iPhone 6.

This fundamental fact should encourage investors to be bullish on AAPL. Buying the stock now while the stock trades below $110 could prove profitable since I expect the iPhone 7 to generate sales of more than 100 million units during the next three quarters. Furthermore, Wall Street analysts and institutional investors prioritize unit sales of iPhone over margins.

We must never forget that Apple can easily reverse the declining unit sales of old and new iPhones by reducing their average selling prices. I firmly believe that the iPhone 7 will be sold with lower average selling prices compared to the iPhone 6s/iPhone 6.

Boring iPhone 7 Will Still Be A Giant Stock Mover

A boring iPhone 7 (that only has minor improvements over the two-year-old iPhone 6) will still inspire tens of millions of iPhone users to upgrade their phones. My analysis is that Apple has changed its tactic to increasing the iPhone refresh cycle to three years but it is also eventually reducing the average selling price. The starve-the-iPhone-loyalists approach is going to be an effective sales booster since Apple fans will have no choice but to buy the iPhone 7. Otherwise, they will have to wait for three years to get a new iPhone redesign.

Apple, as the past have shown, always reduces the price tags of its iPhone products over their product lifetime. The majority of iPhone loyalists will forgive Apple’s shift to 3-year refresh cycle as long as the iPhone 7 continuously gets reduced price tags. The more loyalists that buy the iPhone 7, the better it will be for the topline growth of Apple.

Analysts who see Apple beating estimated iPhone unit sales for the next three quarters will again be endorsing a Strong Buy rating for AAPL. Institutional investors who see Apple reporting a reversal in quarterly unit sales of iPhones will likely increase their long position on AAPL. Getting on the good side of fund managers is essential to Apple’s future stock performance.

The first two quarters of this year saw hedge fund managers going negative on Apple because they did not like the iPhone’s sudden decline in unit sales. As per my Ultimate premium account at TipRanks, hedge fund managers dumped most of their AAPL stocks last Q2 2016.

I calculate that hedge fund managers will be more bullish on AAPL after the iPhone 7 is released. These managers know that the iPhone 7 will again become 2016 Holiday Shopping’s best-selling premium phone. Consequently, AAPL’s price on January 2017 will definitely get a big boost from Christmas gift-givers and Black Friday shoppers.

Past Successes with AAPL Forecasts

I Know First is an Israeli fintech company that created an algorithm to predict stock market movements. The algorithm generates daily market predictions for stocks, commodities, ETF’s, interest rates, currencies, and world indices for the short, medium and long-term time horizons.

On July 5th, 2016, an I Know First financial analyst wrote an article concerning Apple’s future. She discussed the advancements an iPhone 8 would make on the current model and how it would boost iPhone sales. She went further discussing projects in Apple’s works such as Project Titan (an Apple car) and acquiring Tidal (a music streaming service). Moreover, major progress has been made in Apple Campus 2: Apple’s new headquarters. Most importantly, Apple is planning on opening more retail stores in other countries and new research facilities in India.

These future growth prospects all made for a positive future for Apple’s stock. Both the analyst and the I Know First algorithm predicted AAPL to be bullish in the long-run. Since this article, AAPL has increased 14% in accordance with the I Know First algorithm’s predictions.

The above picture shows an actual prediction by the I Know First algorithm on Apple. The algorithm gave Apple a green buy signal with a signal strength of 22.54 and a predictability indicator of 0.21. Apple then increased one month later by 10.31% as the algorithm predicted.

Conclusion

I reiterate my Buy rating for Apple. You already made money if you followed my previous algorithmic-fueled Buy recommendations for Apple. I went long AAPL when it was around $96 and I added more when the stock dropped below $92 after the Brexit vote. We can all still make more money if we go long on AAPL prior to the release of the iPhone 7.

The herd mentality of American investors told me that popular stocks like AAPL move upwards when management reports better-than-expected sales numbers for their number one products. The iPhone 7 is slated to become AAPL’s biggest booster this year.

The long-term algorithmic forecasts for AAPL are also all positive. I Know First’s deep learning machine is making strong buy signals for AAPL based on its 30-day, 90-day, and 1-year algorithmic forecast scores. I made good money using the Artificial Intelligence-powered trading signals of I Know First.

To reinforce my Buy rating for AAPL, I would also like to share with you that technical analysis also favors going long on AAPL now. The stock market emotion is definitely on the upside for AAPL.