In the world of technology, there are few products that are as hotly debated as the Apple iPhone. After all, the cell phone industry is one of the largest in tech; and the iPhone is by far the leader of the industry. However, there has been quite a bit of concern revolving around Apple's ability to continue to produce better and better results around the smartphone. Some argue that Apple is a victim of its own success and that competitor growth is going to put strain on the company. Others argue that Apple's superior product will continue to produce astonishing results with each new version. So, who's right? How will the iPhone do and how is it likely to affect Apple stock?
The Bullish Argument Around The iPhone
Perhaps most notably, Bank of America/Merrill Lynch recently changed their estimates of iPhone sales. Before today, they were expecting Apple to sell 46 million units in the second quarter. However, in a research note published earlier today, the firm stated that its checks revealed that near-term iPhone supply chain momentum remains strong. As a result, they are expecting sales of the smartphone to remain strong as well.
Outside of Bank of America/Merrill Lynch's recent update, there are several investors that are bullish on the iPhone; saying that it all boils down to product quality and branding. There is no arguing that the iPhone is the largest brand in the smartphone industry today; and that consumers aren't likely to change what they're used to unless they realize problems with the iPhone. Another major argument for the bulls includes the ecosystem attached to the iPhone. As with many of other Apple products, the iPhone can be used to enhance other products in the ecosystem. For example, the Apple watch isn't quite the same if it's not paired with an iPhone. The iPhone can act as a remote control for Apple TV; and far more. So, with a strong brand and incredibly persuasive ecosystem, the bulls argue that the iPhone will continue to sell incredibly well.
The Bearish Argument On The iPhone
One of the most important parts of this argument is that Apple is a victim of its own success. The idea is that the company has done so incredibly well selling its iPhone recently that it's not going to be able to top itself. In reality, this is an incredibly valid argument because if sales to plateau, we can expect the company's stock to fall; and with the iPhone currently dominating the market, one has to ask “How much more can this brand really grow?”
Another major argument is the fact that while iPhone market share is growing in China, it seems to be falling just about everywhere else. There's no arguing the fact that China is a massive market, but declines around the world could take their toll on the company's ability to sell the iPhone.
What To Watch For And How To Profit
While I don't like to say it, I do have to say that I'm on the bearish side of this argument. While I understand Apple's ecosystem, and the fact that the downline seems to be continuing at a positive rate, I also don't see much of an opportunity for Apple to grow the iPhone's market share as they have saturated the market so much already. As a result, when the company releases their next earnings report, we're likely to see declines in iPhone sales; which will most likely lead to declines in the stock price. Although anything is possible, this seems to be the most viable result. With that said, watch Apple closely as we're likely to see downtrends that could open the door for profitable puts upon the company's next earnings release.
What Do You Think?
How do you think iPhone sales will do in Q2 and why? Let us know in the comments below!