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Will Apple iPhone 7 Sell, With Bigger Upgrade Coming Next Year?

Apple ( AAPL ) shares have gotten a lift this week on reports of higher-than-expected production orders for the upcoming iPhone 7. But Wall Street is starting to wrestle with worries that iPhone users might skip that modest upgrade and wait for next year’s expected radical redesign. The iPhone 7, likely to be released in September, is expected to look much like the current iPhone 6S series, but with a thinner body, faster processor and better camera. It also could be the first waterproof iPhone. But next year’s iPhone 8 is rumored to use an OLED display, which offers richer colors, darker blacks and lower power consumption. OLED displays also are thinner than LCD screens and are flexible, allowing new design options. The iPhone 8 could feature an all-glass, curved screen design. It might even eliminate the physical home button in favor of the pressure-sensitive screen, according to tech news reports. Universal Display ( OLED ) stock climbed to a record high Tuesday on the iPhone 8 speculation. Universal Display is a key supplier of technology and materials for OLED displays. Universal Display climbed as much as 5.8% to 64.83 in intraday trading on the stock market today . In afternoon trading, it was up 5%, near 64.50. Apple shares were up 1.4%, below 98, in afternoon trading Tuesday. Semiconductor equipment manufacturer Applied Materials ( AMAT ) also is benefiting from interest in OLED. Last week, Applied Materials said its Q2 display orders rose a whopping 483%, driven by demand for machines used to manufacture OLED displays. With rumors rampant about the iPhone 8, smartphone users looking to upgrade will have to decide whether to get a more traditional-looking iPhone 7 or hold out for the revamped iPhone 8. Consumers Won’t Skip iPhone 7 Upgrade: Wells Fargo Wells Fargo Securities analyst Maynard Um said in a research report Monday that he doesn’t believe next year’s iPhone will hold back upgrades during the iPhone 7 cycle. “While it is reasonable to assume Apple may introduce an iconic iPhone in 2017, we believe it is not a foregone conclusion that the consumers will skip the iPhone 7 upgrade in 2016,” Um said. “The core of our premise revolves around continued competition for subscribers as two-year contracts come up for renewal.” If wireless carriers continue to run aggressive promotions to reduce subscriber churn and to attract new customers coming off two-year contracts, there may be strong incentives for people to upgrade, Um said. Um has an outperform rating on Apple stock, with a fair value of 120 to 130. Despite encouraging iPhone 7 production reports , UBS analyst Steven Milunovich is cautious. He recently lowered his iPhone forecast to unit growth of 2% for fiscal 2017, down from 4% previously. Apple’s fiscal 2017 starts on Sept. 25. For fiscal 2018, during the iPhone 8 cycle, he expects unit sales growth of 15%. Milunovich rates Apple stock as buy, with a 12-month price target of 115. “A lack of differentiation in the iPhone 7 will cause the upgrade cycle to lengthen,” he said in a report. “Although it’s possible that Apple has a ‘gee-whiz’ upgrade in store for the iPhone 7, the absence of leaks makes it unlikely.” RELATED: Universal Display Spikes On iPhone OLED Prospects Apple Begins Retail Refresh With San Francisco Store

Palo Alto Networks’ Q3 Seen Hitting 2014 Trough Levels Amid Slowdown

Palo Alto Networks ( PANW ) is expected late Thursday to report fiscal Q3 sales and earnings that decelerated to mid-2014 trough levels, with further sales-growth slowing expected in fiscal Q4, according to the consensus of 43 analysts polled by Thomson Reuters. In early afternoon trading on the stock market today , Palo Alto Networks stock was up a fraction, near 145. The rise underperformed IBD’s 26-company Computer Software-Security industry group, which jumped 1.6%. A weak April-quarter earnings report by the company could stoke further questions of a broad cybersecurity slowdown . This month, investment bank Piper Jaffray noted slowing demand for Palo Alto Networks products, citing its own checks of the sales channel. Palo Alto’s results come after soft Q2 and fiscal 2016 guidance from security vendors Check Point Software Technology ( CHKP ) and FireEye ( FEYE ). Imperva ( IMPV ) and Proofpoint ( PFPT ) likewise missed with their Q2 guidance, and Barracuda Networks ‘ ( CUDA ) and Fortinet ‘s ( FTNT ) full-year views lagged. For fiscal Q3, Palo Alto Networks is expected to report $339.5 million in sales and 42 cents earnings per share minus items, up a respective 45% and 83% vs. the year-earlier quarter. A company faces the prospect of lower percentage growth when it gets bigger, but Q3 sales would decelerate for the fourth consecutive quarter and would dip below 50% growth for the first time since June 2014. For the current fiscal Q4, the analyst consensus calls for 37% year-over-year growth, lagging the 53% growth average Palo Alto has enjoyed the past three years. Q3 EPS, as modeled, would break a five-quarter streak of triple-digit growth and touch a seven-quarter low. But analysts model 79% EPS ex items growth in fiscal Q4, which would top the 55% growth average for Palo Alto’s past three July quarters.

Verizon CEO: Go90 ‘Overhyped,’ But ‘Expectations Are Realistic’

Verizon Communications ‘ ( VZ ) Go90 mobile video service was “overhyped,” Verizon CEO Lowell McAdam said at an investor conference Tuesday. McAdam downplayed expectations for Go90, speaking at the JPMorgan financial conference in Boston. “I think maybe it did get a little over-hyped, and I’m sure we contributed to that to a certain extent,” McAdam said. “We didn’t believe it was going to move the needle on a $130 billion revenue stream overnight. It’s one of those things you have to work into.” Verizon has not disclosed how many subscribers it has for the ad-supported Go90 service, which targets millennials (ages 18 to 34) and “Gen Zers” (teens). Launched in September, Go90 provides a mix of original Web TV series, live sports, concert streaming, prime-time TV and other offerings. Verizon’s Go90 is usually lumped with emerging over-the-top (OTT) video services, such as Dish Network ‘s ( DISH ) Sling, but the mobile app also competes for millennial attention with the likes of Alphabet ( GOOGL ) parent Google’s YouTube, Facebook ( FB ), Instagram and Snapchat. “We have seen enough success to make us excited about continuing to work it. We’re on pace,” McAdam said. “Bottom line is that Go90 is in a good spot from our perspective. We’re going to continue to pursue it. But our expectations are realistic.” At an analyst meeting in April, Verizon executives indicated they might expand Go90 to multiple video streaming platforms this year. As for speculation that Verizon remains the front-runner to acquire the main business of Web portal Yahoo ( YHOO ), McAdam acknowledged interest, though it’s not the first such acknowledgement by Verizon executives. “We can’t talk about Yahoo, but that’s a possibility,” McAdam said at the conference, news website TheStreet reported . “That’s a possibility to gain greater scale.” Verizon stock was up a fraction, near 49.50, in midday trading in the stock market today .