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

Mizuho desk analysts have recently expressed a favorable stance on Apple stock, viewing it as a compelling investment opportunity despite current negative news and sentiment surrounding iPhone unit sales. They anticipate that the forecasted decline in iPhone sales for fiscal 2025, particularly for the iPhone 16, will be relatively stable, predicting sales to remain flat or decrease slightly in the low single digits compared to the previous year—an outlook better than many investors fear.

The analysts believe that following a challenging period through March 2025, the stock has the potential to recover, particularly with the release of a preview of the new iOS in June and the expected launch of a more AI-integrated iPhone 17 in September 2025. They noted that “patience will be rewarded” and assess that the near-term downside risk is limited due to overly negative sentiment among buyers and heightened short interest.

Mizuho’s team has adjusted its estimates, now predicting a 6% decline in iPhone unit production for 2024, which lowers the estimate for the iPhone 16 model from 90 million to 220 million units. Despite this downward adjustment, they project a rebound in 2025 with an estimated 8% increase in unit sales to 239 million, bolstered by the release of the new iPhone SE and the anticipated iPhone 17. Looking ahead, estimates for 2026 suggest iPhone unit sales could reach approximately 250 million.

The analysts project that the iPhone 17 could achieve sales of 97 million units in 2025, a figure about 10% higher than the revised forecast for the iPhone 16. This information is potentially positive for DRAM manufacturers, as the iPhone 16/Plus and new SE4 models are expected to feature 8GB of DRAM, an increase from the 6GB found in the iPhone 15 models. Notably, the iPhone 17 Pro and Pro Max may come equipped with 12 or 16 GB of DRAM, depending on anticipated price drops in memory next year.

Additionally, Mizuho analysts predict that Apple will transition to using its own internal modem chips starting with the iPhone 18, moving away from its reliance on Qualcomm’s modems, with this transition expected to be completed across all iPhone models by the time the iPhone 18 launches. Furthermore, a foldable iPhone is anticipated to debut in 2027, which could stimulate investment in G6 OLED panels.

The introduction of new AI software features in iOS could also enhance the upgrade cycle starting with the iPhone 17. Analysts remarked on the prevailing negative sentiment among buyers regarding AAPL and the iPhone supply chain, suggesting that the market’s outlook may be overly pessimistic.

Separately, Mizuho analysts focused on Apple’s iPhone roadmap, emphasizing its dedication to AI services and related components, including application processors, cameras, sensors, and DRAM. They anticipate a downturn in DRAM prices by early 2025, which is expected to help lower costs throughout the supply chain. Significant developments on the horizon include the rollout of in-house modems in 2025 and foldable OLED technology by 2027. While AI services may drive more frequent device upgrades, the overall impact of these services will need thorough evaluation, according to the analysts.