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Mizuho pitches Apple stock as a 'out of favor long idea'

Published 04/10/2024, 11:28 pm
Updated 05/10/2024, 12:56 am
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Investing.com -- Mizuho desk analysts said they like Apple (NASDAQ:AAPL) stock “as an out of favor long idea,” where negative headlines and sentiment for iPhone unit declines are already priced in. They expect Apple's fiscal 2025 iPhone sales, particularly for the iPhone 16, to be relatively stable, projecting sales to be flat to down in the low single digits year-over-year—better than many fear.

The analysts also believe that after a tough period through March 2025, the stock could rebound, supported by the June iOS preview and the launch of a more AI-integrated iPhone 17 in September 2025.

“Patience will be rewarded, near-term downside risk [is] limited as buy-side super negative and short,” analysts wrote.

Mizuho’s team now expects a 6% decline in iPhone unit production for 2024, reducing the estimate to 220 million units from the previous 90 million for the iPhone 16 model.

Despite the downward revision for 2024, the experts predict a rebound in 2025, with an estimated 8% increase in unit sales to 239 million, thanks to the introduction of the new iPhone SE and the anticipated iPhone 17. Looking further ahead, the unofficial view for 2026 suggests iPhone unit sales could reach around 250 million.

Mizuho analysts further project Apple's upcoming iPhone 17 to sell 97 million units in calendar year 2025, which is about 10% higher than the revised forecast for the iPhone 16.

This is seen as potentially good news for DRAM manufacturers like Micron Technology (NASDAQ:MU) as the iPhone 16/Plus and the new SE4 models are expected to include 8GB of DRAM, up from 6GB in the iPhone 15 models.

“Even better is that 17 Pro & Pro Max could have 12 or 16 GB of DRAM due to expected price declines in memory next year,” analysts noted.

They also estimate that Apple will begin using its own internal modem chips starting with the iPhone 18, moving away from Qualcomm (NASDAQ:QCOM)'s modems. Such a transition is expected to be complete for all iPhone models by the time the iPhone 18 launches.

Furthermore, Apple is anticipated to launch a foldable iPhone in calendar year 2027, which could drive further investment in G6 OLED panels.

Analysts think that new AI software features in iOS could enhance the upgrade and replacement cycle starting with the iPhone 17.

“Buyside feedback could not be more negative on AAPL and iPhone supply chain,” analysts continued.

“Feels like a lazy and super crowded short where buyside unit estimates for CY25 iPhone likely expect negative unit growth in low-single-digits year-on-year vs sell side consensus that was 5% growth and now likely flat year-on-year.”

In a separate note, Mizuho Asia analysts said Apple's iPhone roadmap focuses on AI services and related components like application processors, cameras, sensors, and DRAM. They expect a downturn in DRAM prices by early 2025 to help reduce costs across the supply chain.

Key developments include the introduction of in-house modems in 2025 and foldable OLEDs by 2027. While AI services could drive increased device upgrades, the full value of these services “is something that will need to be evaluated,” they said.

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