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Where the Apple Stock Price Is Headed in 2016
Despite Apple stock slipping in early 2016, it remains one of the best stocks on the market today to buy and hold long term.
Apple stock dipped below $100 per share in early 2016 along with the broader markets. Through the first month of the year, the Apple stock price dropped 8.4%, while the Dow Jones dipped 5.6%. It has since rebounded, and has flat year-to-date returns.
But Money Morning experts see Apple Inc. (Nasdaq: AAPL) stock as a solid long-term investment.
Before we get into the reasons why AAPL stock will be so profitable, let's look at why the Apple stock price has dipped in 2016…
In early January, the AAPL stock price fell following a negative report about iPhone sales.
Reports of slowing iPhone sales started in November, but hit with more frequency throughout December and January. Most cited data from Apple suppliers indicating a slowdown in iPhone production.
Analysts have taken this data and lowered their iPhone forecasts dramatically. Several such as Morgan Stanley and Credit Suisse are now projecting that 2016 iPhone sales will actually decline year over year – a much worse prospect than slowing growth.
Then the financial media piled on, with pundits declaring that we've reached "peak iPhone."
Following the weak iPhone report, the Apple earnings report for Q4 also disappointed investors.
On Jan. 26, Apple reported earnings of $3.28 a share. That topped forecasts for $3.23 a share, but was an increase of just 1.9% from the same quarter a year ago. Still, the $18.4 billion in profit was the most by any company in history.
Revenue rose just 1.7% to $75.87 billion, which fell short of the consensus estimates for sales of $76.6 billion.
Apple sold 74.77 million iPhones in the quarter as well. The product that accounts for two-thirds of those sales. The increase of less than 1% year over year missed forecasts for sales of 76.54 million iPhones.
But despite the reports of slowing iPhone sales and uninspired earnings, Money Morning experts are still bullish on the AAPL stock price in the long term.
"If you're looking at the long haul, Apple is still a stock to own," Money Morning Defense & Tech Specialist Michael A. Robinson said on FOX Business in January.
Here are three reasons to remain bullish on Apple stock today…
iPhone growth has slowed, but this slip in growth is likely only temporary. Apple's global smartphone market share generally hovers around just 15%, meaning it can keep chipping away at Android's dominant share of 80%-plus.
Apple also has untapped potential in China. As Tim Cook pointed out in a recent conference call, the Chinese middle class is expected to grow from 50 million in 2010 to 500 million in 2020, and many of them will want iPhones.
Over in India, which is the next major growth market for smartphones, Apple has been busy laying the groundwork for the iPhone. It has plans to open more stores there in the next year or so, and sales have already started to accelerate.
Apple sold 800,000 iPhones in India in the December quarter, and 1.7 million for calendar year 2015. That December quarter figure represents year-over-year growth of 60%.
Then there's Apple's thriving ecosystem, which is stronger than ever…
Apple's services includes iTunes, iCloud, the App Store, and Apple Pay. And these are all part of the Apple "Ecosystem." In the last earnings report, Apple said revenue from that segment was up 23% in 2015.
The Apple profit machine ultimately runs on the fuel of its ecosystem – the glue that ties all those elements together and keeps customers loyal to the Apple brand.
Here's a full rundown of Apple ecosystem products:
"A billion devices connected to Apple's services just in the last 90 days. That's enormous – $5 billion in service revenue," Robinson said. "They have a built-in customer base second to none in technology and really in the world in any kind of a consumer format."
Of course, many critics say Apple needs to produce another game-changing product like the iPod/iTunes tandem or the iPhone.
The notoriously secretive Apple probably has such a project in the pipeline. It could be the much-rumored Apple Car, or the definitive virtual reality platform. But Apple knows only too well that it needs to continue innovating.
Apple may not necessarily build a car, but could create self-driving technology to sell to automakers. Whatever Apple is doing in the auto space, we won't see it in 2016 – or 2017, for that matter.
So the company is not relying on iPhone sales alone. And the ecosystem will continue to have a major impact on the Apple stock price for years to come.
And the third reason we're bullish on the Apple stock price for the long-term is the future unveiling of the iPhone 7.
The iPhone 7 – expected to launch in September 2016 – is bound to have at least one extremely tempting new marquee feature.
One rumor already circulating is the possibility of a nearly unbreakable sapphire screen. Another is that the new iPhone will be waterproof. We could see both.
Apple uses both technologies in the Apple Watch, so that's not out of the question.
Durability is a big issue for all smartphone users. A nearly indestructible iPhone 7 would give both sales and the Apple stock a huge jolt.
Another positive long-range factor will be the new iPhone subscription plan, which allows users to upgrade to the latest iPhone each year. We won't see the impact of that until Q1 2017.
Either way, the unveiling of a new iPhone will have a huge boost on Apple's sales. And it will be a major catalyst for the Apple stock price into 2017.
So where exactly do we see the Apple stock price heading? Here's Robinson's Apple stock price prediction…
The first question is whether Apple stock will keep falling in 2016 before it rebounds. Can it get cheaper?
Yes, maybe a little. Given its negative momentum right now, AAPL stock could easily sink to about $85, but probably no lower. It's notoriously hard to time these things, so investors considering whether to buy AAPL stock shouldn't wait too long.
After that, look for Apple stock to recover.
Robinson has an Apple stock price target of $130 by Labor Day 2017. Robinson's $130 target is about 35% higher than where AAPL stock is trading now. And he's not alone in believing that Apple stock will right itself. Even after several Wall Street analysts lowered their Apple stock price targets as well, the consensus is still about $138.
Stay tuned to Money Morning for everything you need to know about Apple stock in 2016 and beyond…