Despite the rebound in Apple (AAPL) stock, one bearish analyst is sticking to his guns and says recent optimism over the iPhone maker's services business is misguided.
X"We are hard pressed to argue the services business is wildly undervalued," said Instinet analyst Jeffrey Kvaal in a report published Monday. Kvaal has a neutral rating on the stock.
According to Reuters, 16 analysts rate the tech icon a buy and 13 rate it outperform. Kvaal is one of 14 analysts with a neutral or hold rating on Apple stock.
Shares gained 0.7% to close at 187.63 on the stock market today, continuing its rally after reporting fiscal second-quarter earnings in April. The stock is up more than 11% thus far in 2018 and has jumped 22% from a year ago.
"Apple believes its shares are undervalued in part as investors do not fully appreciate its growing services business. It is thus buying back $100 (billion) of its shares," added Kvaal in the report. "However, we believe at least some of the services strength is embedded in the shares."
"We believe the investor community would be better able to grasp the services story with better disclosure — particularly as margins likely vary wildly within the services portfolio," he added.
Apple services growth built-in price?
The company's services businesses include Apple Music, Apple Pay, AppleCare, iCloud, App Store and other offerings.
Its iPhone sales in the March quarter were light and Kvaal says the June quarter may disappoint.
The consumer electronics giant sold 52.2 million iPhones in the quarter, vs. analyst predictions for 53 million units.
"Apple guidance implied fiscal third-quarter iPhone unit volumes that were better than feared. We do not believe, however, sell-through has meaningfully improved," said the bearish analyst.
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