The article was written by Ayush Singh – Senior Analyst at I Know First.

AAPL Stock Predictions: Summary

Obsession with year over year growth will put pressure on Apple’s stock.

Obsession with year over year growth will put pressure on Apple’s stock. Falling iPhone, iPad and Mac sales are short-term headwinds for Apple.

Apple’s future success hinges on the iPhone 7 and I expect the company to deliver.

Apple’s long-term prospects look good, but investors should wait for a better entry-point.

I Know First Algorithm has a Bullish forecast for AAPL for the long term

Having been bullish on Apple throughout 2014 and for the most part of 2015, I recently changed my stance and recommended investors to sell the stock. I have always believed that Apple is a great company, and the stock is relatively cheap. However, the market has an irrational obsession with year over year growth, which is why I recently turned bearish on the stock.

(Source: TipRanks.com)

iPhone sales have been moving higher on an annual ever since Apple launched the smartphone. Apple generates the majority of its revenue from iPhone sales. For this reason, the market correlates the success of the iPhone with Apple’s stock. As a result, when Apple reported its quarterly earnings earlier this week affirming a slowdown in iPhone sales growth, the stock plunged considerably the following day.

Cheap stocks can continue getting cheaper, and Apple and Gilead Sciences (GILD) are prime examples. I still believe that Apple is a great stock for the long-run, however I think investors looking to buy the stock should wait for a few more months as I expect Apple to get cheaper going forward.

No Growth

As mentioned above, the market is obsessed with year over year growth. Hence, since iPhone sales missed the consensus estimates, I expect Apple’s shares to fall under $90 in the short-term. To make matters worse, iPad sales and Mac sales dipped considerably and missed the consensus by a wide margin.

And to top it all off, Apple slashed its revenue guidance for the upcoming quarter by 10%-15%. Apple expects revenue between $50 billion to $53 billion for Q2, a lot lower than the consensus of $55.6 billion. To put in perspective, even if Apple manages to meet the mid-point of its guidance, its revenue will be 10% lower year over year. This clearly affirms that the Cupertino giant expects iPhone sales to fall in the upcoming quarter, marking the first year over year decline in iPhone sales.

To be honest, I am surprised by the fact that Apple managed to grow iPhone sales in Q4. I have been warning investors about the year over year dip for a few months as I knew iPhone sales will decline due to tough comparisons from last year. There was strong pent-up demand for a larger screen iPhone, which is why the iPhone 6 turned out to be a blockbuster product. That being said, I knew that Apple will have a hard time coming up with something that beats the upgrade to a bigger screen. And since Apple failed to add significant new features to the iPhone 6S, I recommended investors to sell the stock in anticipation of a sales decline.

Weakness will continue

Apple is trading at under 9x trailing earnings, and for a company that has $39 per share in cash, the valuation is ridiculously low. That being said, I expect Apple to continue getting cheaper in the short-term. Investors looking to buy Apple should hold off for about three months and should only consider buying the stock before the launch of the iPhone 7.

Apple has guided lower for the upcoming quarter, and I expect it to report weak numbers again. Given the growing strength of the U.S. dollar along with the dire state of the Chinese economy, I think Apple will struggle to beat the revenue estimates in the next quarter. The company’s growth days are coming to an end, and the perception of slowing growth will definitely put negative pressure on Apple’s stock.

Investors looking to buy Apple should keep a close eye on the launch of the iPhone 7 as I believe Apple’s success completely hinges on it. I expect Apple to deliver a great product in the iPhone 7, thereby kick-starting the growth of the device. However, the company still has two more quarters to go before they officially launch the next installment of the iPhone.

So, I think investors should avoid Apple’s stock for the short-term and should buy the stock a few months before the launch on the iPhone 7. Investors can bet on Apple to deliver a great product in the form of the iPhone 7, however the stock will continue experiencing weakness due to the slowing growth of the iPhone 6S.

Conclusion

All in all, I think investors should wait for a better entry-point as falling iPhone sales will put more downward pressure on the stock for the coming months. However, I still believe that Apple is a great company and expect it to deliver a blockbuster iPhone 7. So, in my opinion, the perfect time to buy Apple’s stock would be around July 2016, which is when I expect it to bottom.

My long-term bullish outlook is echoed by algorithmic forecasts of I Know First. I Know First uses an advanced state of the art algorithm based on artificial intelligence and machine learning to foresee market performance for more than 3,000 markets including stock forecasts, world indices, commodities, interest rates, ETFs, and currencies. The algorithm generates a forecast with a signal and a predictability indicator. The signal is the number at the center of the box. The predictability is the figure at the bottom of the box. At the top, a particular asset is identified. This format is standardized across all forecasts. The middle number indicates strength and direction, not a price target or percentage gain/loss. The bottom figure, the predictability, signifies a confidence level.

I Know First published an article predicting the 2016 bearish AAPL movement on October 11th, 2015. It argued that Apple is unlikely to hit $150 in 12-months is also supported by I Know First’s pessimistic algorithmic forecast for AAPL. The latest October 11 forecast for Apple says that even after 12 months, the stock is unlikely to move up from its current price of $112.

In addition, previously I Know First Algorithm correctly predicted AAPL stock movement. In this stock forecast, we can observe how Apple had a bearish signal of -0.71 and a predictability of 0.2 on Oct 16th,2015 and in just 3 months managed to go down of 12.80%.

Having checked the accuracy of I Know First algorithms in prediction the movement of AAPL, let’s give a look at a most updated forecast:

As you can see from the chart above, the green 9.01 1-year forecast shows that the stock will head higher in the long-term. However, I think patient investors will get a better entry-point in the short-term, which is why I think investors should wait a few months before buying Apple.

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