A Bank of America analyst says that the stock isn't certain that Apple Inc. can keep it up this year, despite the fact that it beat the broader technology industry.
Analyst Wamsi Mohan downgraded Apple's stock AAPL to neutral from buy Thursday, saying demand trends could worsen heading into the new fiscal year.
He said that the shares have outperformed significantly year to date and have been perceived as a safe haven. We expect that there will be a negative estimate revision over the next year, as we see risk to this outperformance over the next year. Apple's shares have declined 20% so far this year, as the S&P 500 SPX has fallen 24% and the S&P Composite 1500 Information Technology sector has declined 31%.
The stock was down 5.1% in Thursday s session.
Mohan worries about a possible weakness in the iPhone 14 cycle due to the economic pressures on consumers in Europe. While some analysts have been positive about the performance of the company's higher-priced iPhone 14 Pro models even though base-level iPhone 14 models seem to be disappointing, Mohan said that a stronger mix of Pro models won't be able to offset declines in revenue or profits if overall unit sales fall.
He also sees an incremental risk of deceleration for the company s services business and worries that the iPad segment could see a reversion to pre-COVID levels. Mohan continued that the Mac business could revert back to pre-pandemic levels.
The challenges Apple faces from the stronger U.S. dollar are the first to come to an end. Demand destruction is likely to occur if hedges pricing provide some offset, according to Mohan.
In his latest note, he took the opposite view from Rosenblatt Securities analyst Barton Crockett, who upgraded Apple's stock Thursday. Crockett was positive about demand dynamics in the iPhone business, writing of strong consumer buying intent, especially for the Pro line, based on the results of his recent U.S. consumer survey.
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Analysts agree that Apple shares are overwhelmingly bullish: three of the 41 analysts tracked by FactSet who cover the stock have sell ratings, while six have hold ratings and 32 have buy ratings. The average price target on FactSet is $181.92, nearly 28% above current levels.