Jefferies Explains Why Apple Could Lose Its 'Cool' Factor To Samsung This Year

In a report issued Wednesday, Jefferies commented on Apple Inc.'s (NASDAQ: AAPL) earnings. Even though the company posted a record-breaking quarter, which included the sale of 74.5 million iPhones, the firm maintained a Hold rating, mainly because it is concerned “Apple is at risk of losing its ‘cool’ factor this year to Samsung's high-end phones featuring flexible displays, more advanced 14nm semiconductor components, and attractive designs.”

The report explains: “Our [Jefferies’] proprietary survey, Strategy Analytics' user study, and online reviews suggest consumers and carriers are excited about flexible display. In contrast, supply chain expectations for the next iPad and iPhone products from our research partners Fubon in Taiwan appear lackluster.”

Despite having reiterated a Hold, Jefferies boosted its price target on the stock from $120 to $124, implying an upside of more than 13 percent from Tuesday’s closing price of $109.14.

Analysts still believe that “Apple needs to raise its game in Cloud Services [an area in which they think Google is leading by a wide margin] to mitigate iOS hardware risk.”

The guidance provided for the current quarter (FQ2) confirms the research firms’ view that “iPhone strength is likely to continue near term.”

Therefore, the analysts raised their fiscal 2015 EPS estimates by 7 percent to $9.15 (from $8.52). But, “as iPhone momentum decelerates in 2015, we [the analysts] are concerned Apple is at risk of losing investor confidence, and the investment debate could shift to cash returns and other new products, including the Apple Watch.”

Image credit: Oskar Alexanderson, Wikimedia