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Why this Apple bull is showing some caution


Apple Inc. may have seen far better monthly sales improvement in June than it historically does, but an analyst at KeyBanc Capital Markets is still feeling cautious.

Brandon Nispel wrote late Monday that KeyBanc’s analysis of U.S. card spending indicated a 23% month-over-month bump in spending on direct Apple
AAPL,
-0.28%

purchases during June, when looking at transactions of at least $400. The good news is that rate is above the 2% average growth seen for that month over the past three years.

But when stepping back and looking at data for the June quarter on the whole, Nispel flagged a 15% quarter-over-quarter decline in spending, compared with a 9% decline on average over the past three years.

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Since management previously indicated expectations for a similar rate of decline in total revenue during the fiscal third quarter to what was seen in the fiscal second quarter, KeyBanc’s data “would suggest downside risk to consensus,” Nispel wrote.

“While our AAPL direct channel data is showing softness, we also believe domestic iPhone sales are being pressured from slowing U.S. carrier activity (indirect
channel) and lower upgrade rates, where we feel comfortable with our below consensus -19% [quarter-over-quarter] total hardware revenue estimates,” he continued. Consensus expectations are for a 17% decline.

Nispel flagged “historical lows” for smartphone upgrade rates in the U.S.

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His caution on the most recent quarter, results for which Apple will report Aug. 3, comes as he remains upbeat about Apple shares over a longer span. He boosted his price target on Apple shares to $200 from $180 Monday and kept an overweight rating.

In Nispel’s view, “the bull case for the stock with excitement around new products and investors reaching for safety is resulting in an elevated multiple.”

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