Apple bears need therapy, says market strategist

Do Apple bears need therapy?
Do Apple bears need therapy?   

Apple shares are up 18 percent this year, with the latest good news coming in the form of Apple's first-quarter earnings report.

The estimate-busting numbers may not have boosted the stock on Tuesday, but they at least appeared to show that the bullish consensus on the stock is well-founded.

Meanwhile, Apple bears are hurting. And one market strategist says that it's time for them to seek professional help.

"We would encourage those professionals who love to hate AAPL to book themselves a series of therapy appointments," said Neil Azous, a market advisor with Rareview Macro. "This story for Apple just has a lot of legs to go higher. And it's very difficult when you look at the combination of their guidance, their capital redeployment plans, and their margins, to be pretty negative on the stock, when you think about it in the medium-term."

In its Monday evening report, Apple not only beat earnings and revenue estimates, but increased its total capital return program to $200 billion, by boosting both its dividend and share buyback program.

The therapy is required, says Azous, because skepticism about the stock runs so deep as to border on pathological.

"When you look at what they're geared to going forward, it has so many things that people disbelieve in, such as, it's geared to China, emerging markets, new products that people don't want to embrace. And when you're in that big of a situation of denial, it requires a certain set of therapy" sessions.

And what should the bears discuss in those sessions?

"That list ranges from their capital redeployment plans—be it their buyback or their dividend, their margins—what their Watch margins can do over the next nine months and impact their overall margins, the new wealth effect when it comes to China's stock market and the fact that in China's terms, they are now the largest buyer of iPhones in the world," Azous said.

"We just have to look at the combinations of those growth profiles across the board and anyone who is in disbelief has to work through that some way. And therapy is one way to think about it," the strategist added.

Naturally, Azous is a bull on Apple shares, which closed Tuesday trading at $130.56, falling 1.6 percent on the session. He predicts that by the end of the second quarter, "the stock will trade over $140, and then in the medium term by the end of the year, it could be north of $150 at the pace that it's going."

Conversely, Nomura maintained its neutral rating on the stock, writing in a note Tuesday that "the Apple Watch is likely the key driver of any share price upside at Apple," but the device is "a solution in search of a problem," and will not see widespread adoption.

"In lieu of positive earnings catalysts, uncertainty over long-term growth and limited upside impact from additional buy-backs we expect the stock to trade in the $130s and track the broader equity markets," Nomura's analyst concluded.

Whether or not the analyst is in professional treatment to deal with his less-than-bullish outlook remains unclear.

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