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Raymond James: Apple Will Stay Range-Bound Until Revenue Growth Stabilizes

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Raymond James predicts Apple Inc. AAPL 6.18% shares will "remain range-bound" until signs of stabilization in revenue growth emerge.

"Apple's guidance for $42 billion in revenue at the midpoint suggests iPhone unit sales will be well below even his recently lowered estimates, with ~3 million channel reduction making iPhone shipments ~38 million, down 20 percent y/y in June by our estimates," analyst Tavis McCourt wrote in a note.

For the third quarter ending in June, Apple guided for revenue between $41 billion and $43 billion and gross margin in the range of 37.5 percent–38 percent.

McCourt said Apple's June quarter outlook "appears to be supporting" his thesis that iPhone SE, like iPad Mini, may cannibalize sales rather than providing incremental growth.

However, the analyst said "it will take a number of quarters to know with certainty."

McCourt, who expects Apple shares will trade at $104 over the next year, cut his FY16/FY17 EPS estimates to $8.15/$8.52 from $8.53/$9.00. The Street expects earnings of $9.03 a share this year and $9.95 a share next year.

"[W]e believe upside potential and downside risk is relatively evenly skewed over the next 12 months. We expect the shares to remain range-bound in the near term until investors get more comfort that the company can return to some level of sustainable growth," McCourt added.

McCourt maintained his Market Perform rating on Apple shares, which were down 6.02 percent to $98.07 at time of writing.

DateFirmActionFromTo
Apr 2016Brean CapitalMaintainsBuy
Apr 2016BarclaysMaintainsOverweight
Apr 2016CitigroupMaintainsBuy

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