Mizuho Presents Apple Stock as an ‘Out of Favor Long Idea’

Analysts from Mizuho have expressed a favorable outlook on Apple stock, referring to it as an “out of favor long idea.” They believe that the negative press surrounding declining iPhone unit sales is already reflected in the stock price. Their projections for Apple’s fiscal 2025 iPhone sales, particularly for the upcoming iPhone 16, indicate stability, with expectations of flat to low single-digit declines year-over-year—more optimistic than widespread fears.

According to the analysts, after a challenging period leading up to March 2025, a rebound is anticipated. This recovery will likely be bolstered by the iOS preview in June and the launch of a more AI-integrated iPhone 17 in September 2025. They noted that “patience will be rewarded,” suggesting that the downside risk in the near term is limited due to a pessimistic outlook from buy-side investors.

Mizuho’s team now forecasts a 6% decrease in iPhone unit production for 2024, revising their estimate to 220 million units for the iPhone 16. Despite this downward adjustment, they project a resurgence in 2025, forecasting an 8% increase in unit sales to 239 million, driven by the introduction of a new iPhone SE and the anticipated iPhone 17. Looking further, they estimate that iPhone unit sales could reach approximately 250 million in 2026.

The analysts predict that the upcoming iPhone 17 will achieve sales of 97 million units in calendar year 2025, which is about 10% above the revised forecast for the iPhone 16. This news could be beneficial for DRAM manufacturers, as the iPhone 16/Plus and new SE4 models are expected to feature 8GB of DRAM, an increase from 6GB in the previous model.

Moreover, it is projected that Apple will start incorporating its internal modem chips with the iPhone 18, phasing out its reliance on Qualcomm’s modems. This transition is expected to be completed across all iPhone models by the time the iPhone 18 is released.

Apple is also anticipated to introduce a foldable iPhone in 2027, potentially stimulating further investments in OLED panel technology. Analysts believe that new AI features in iOS could encourage more upgrades and replacements starting with the iPhone 17.

The feedback from buy-side investors has been overwhelmingly negative regarding Apple and its supply chain. Analysts perceive this sentiment as reflecting a “lazy and super crowded short,” with expectations for flat or declining unit growth in 2025, contrasting with the sell-side consensus that previously anticipated a 5% growth.

In a separate analysis, Mizuho’s team in Asia remarked that Apple’s roadmap emphasizes AI services and related components, including application processors, cameras, sensors, and DRAM. They expect a decline in DRAM prices by early 2025, which could help lower costs throughout the supply chain. Significant developments on the horizon include the advent of in-house modems in 2025 and foldable OLEDs by 2027. While AI services could potentially boost device upgrades, the full impact of these innovations will require careful assessment.