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 Predictions For 2016: Summary

Many Wall Street analysts are bullish on Apple and gave it a 12-month price target of $150

However, I think Apple is unlikely to deliver a $150 stock price in 2016.

Hedge fund managers are nervous that Apple is still too dependent on iPhone sales. The iPhone 6s uptake is slower than the iPhone 6.

The iPad Pro is a mistake. Amazon also banned the Apple TV, reducing the distribution channel of Apple’s main gadget for its upcoming streaming video services

Lack of touchscreen-friendly Mac computers also endangers that business segment. It might repeat the gradual declining sales of the iPad.

I Know First Algorithmic Forecast For Apple

Rob Cihra of Sterne Agee CRT is just one of several analysts who recently recommended a Buy rating for Apple (AAPL). Like previous analysts, Cihra is also touting a 12-month price target of $150 for AAPL. Cihra is encouraging investors not to be shy in going long now while AAPL trades below $115. He believes iPhone sales (which contributes 66-72% of Apple’s annual revenue) will still grow +5% Y/Y for FY 2016.

The $150 price target of Cihra is also near the consensus $146.83 one-year price target for Apple made by several TipRanks-tracked analysts. Unfortunately, I believe that this lofty forward valuation for Apple by Cihra and other Apple bulls face several headwinds.

My pessimism over the $150 Price target is clearly shared by hedge fund managers who are increasingly being negative over the future growth prospect of Apple. As you can see from the chart below, there are AAPL shares being dumped by hedge fund managers compared to the first half of this year.

Many fund managers are clearly going contrarian against the bullish $150 noise of Wall Street analysts.

(Source: TipRanks)

The Possible Headwinds Why Fund Managers Are Not So Bullish On Apple

I am still long on AAPL but I have greatly reduced my bet on this company substantially since early September. I share the pessimism of the hedge fund managers who are also reducing their exposure to Apple. In my opinion, there are several factors that are discouraging hedge fund managers from heeding the $150 price target suggestion of Cihra and other Wall Street analysts.

First and foremost is that I do not believe that the iPhone 6s and 6s Plus will replicate the blockbuster success of last year’s iPhone 6/6 Plus release. My reason for this is that the latest iPhones are not exactly a major upgrade like when Tim Cook approved the phablet-sizing of the formerly 4-inch only iPhones. Furthermore, the Chinese and other buyers who recently bought he iPhone 6 will be loath to spend more money just to get the iPhone 6s. Yes, the better CPU/GPU and the increase to 2GB of RAM of the iPhone 6s is notable, however the luxury pricing of iPhones makes them not ideal for immediate replacement when buyers have spent less than a year enjoying their very pricey iPhone 6/6 Plus phones.

My analysis that the iPhone 6s will not replicate the iPhone 6’s success is in line with the finding of Fiksu and Localytics that the iPhone 6s’ uptake is notably slower than last year’s iPhone 6.

(Source: Fiksu)

The second headwind that I believe are inspiring people to shy away from Apple is the ARM-based iPad Pro. Apple’s enterprise-centric 2-in-1 iPad Pro is clearly a bad mistake because while it copied the form-factor of the Microsoft (MSFT) Surface Pro, it is just a glorified enlarged iPad.

The Intel-less $799-$1,099 iPad Pro clearly makes it inferior to more affordable Windows 10 hybrid tablet/notebook products like the $499 Microsoft Surface. Enterprise users will likely ignore the iPad Pro because it cannot run their expensive industry-standard and custom x86 only software.

I also do not think the enterprise centric iPad Pro will help reverse the declining sales of the iPad division of Apple. There are now thousands of sub-$200 Android and Windows 10 tablets that offer the same media consumption/web browsing purpose of the $399 iPad Mini/$499 iPad Air.

The third negative development for Apple is Amazon’s (AMZN) ruthless ban on the Apple TV. Tim Cook already failed to land a content licensing deal with Hollywood content owners that is why Apple is delaying its premium subscription-only streaming video service to next year.

Amazon’s ban of the Apple TV 3 and Apple TV 4 is another blow to Apple’s ambition to compete with Neflix (NFLX) and Amazon Prime & Instant Video. Amazon’s cheaper games-friendly streaming Fire TV could also persuade more Americans to ignore Apple’s TV box and paid streaming product.

The fourth headwind for Apple is its outdated practice of never releasing a touchscreen-friendly Mac computer. Apple loves its product differentiation policy too much that it is dangerously ignoring that the new trend for computers now is go touchscreen-friendly.

The success of the MacBook Pro in the creative industry may soon wane once more artists and editors realize that the detachable touchscreen display of the Surface Book offers more design flexibility. According to IDC’s Q3 2015 PC report, Mac sales also was lower than last year’s. Investors might find it prudent to expect the Mac computer division to soon suffer the same declining trend of the iPad.

Apple is making a big mistake in not releasing a touchscreen-friendly laptop or desktop Mac OS X computer. Tim Cook’s desire to force creative design professionals to buy a MacBook and an iPad/iPad Pro is a long-term loser idea. Graphic artists are not stupid. It will be cheaper for them to just buy a Surface Pro 4 or a Surface Book to enjoy the benefits of a laptop and drawing tablet.

Algorithmic Forecast For Apple Is Also Not Optimistic

My doubtful assessment 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.

The +1.45 12-month forecast score of AAPL says it has little probability of giving a tidy profit to any investors who buy the stock now. The algorithmic forecast engine of I Know First is machine learning and I believe it takes into account the negative outlook that hedge fund managers are dumping more AAPL shares rather than them buying more.

Conclusion

Retail investors who have a large exposure to AAPL might find it prudent to reduce their stake and use the money instead to diversify. It is always safer for small retail investors to heed the action of hedge fund managers. The big boys are not bullish on AAPL in spite of the $150 price target noise of several Wall Street analysts.

Fund managers clearly have more access to privilege information that encouraged them to reduce their exposure to Apple. I therefore conclude that AAPL is not worth buying now for long-term investors. When institutional investors are now distrustful of Apple’s growth prospect, it is best to not play contrarian against this loud warning.

