Apple (AAPL) – Get a free report stocks extended their declines on Thursday, taking shares to the lowest levels since early November, following another Wall Street downgrade linked to concerns about iPhone demand.
Piper Sandler analyst Harsh Kumar downgraded his rating on Apple to neutral from overweight. He argued that iPhone revenue growth rates – which account for more than half of Apple's revenue – have likely peaked, given weak demand in China and high inventory levels.
Kumar also lowered his price target on Apple shares by $15, to $205 per share.
“We are concerned about phone inventories coming in (in the first half of 2024) and also believe growth rates have peaked for unit sales,” Kumar wrote.
He added that “difficult (comparisons) from 2023, along with continued currency headwinds, are expected to continue into 1H24 and interest rates will remain elevated.”
Kumar's downgrade follows a tougher note on Apple shares earlier this week from Barclays analyst Tim Long. He cut his rating on the stock to underweight, citing a lackluster iPhone 15 launch as well as a moderate rebound in Mac and iPad demand.
Apple shares fell 0.82% in pre-market trading, indicating an opening price of $183.07 each. Such a move would take the stock further into negative territory over the past six months.
The stock hit an all-time high of $199.62 in mid-December.
China risk is 'fictitious': Wedbush's Ives
Apple told investors in November that holiday quarter sales would likely hold steady at last year's total of $117 billion, a forecast that fell short of Wall Street forecasts for a 5% gain.
That took some shine off a solid, but by no means spectacular, fiscal fourth-quarter earnings report that showed a fourth consecutive sequential decline in revenue and big declines in Mac, iPad and Apple Watch sales.
Another notable area of weakness in Apple's quarterly report came from China, where sales fell 2.5% from the same period a year earlier to $15.1 billion.
The drop came amid reports that Beijing banned the use of iPhones by government employees and state-backed companies to support the launch of state technology group Huawei's new Mate 60 phone.
But Apple Chief Executive Tim Cook struck an optimistic tone about the region's prospects in his conference call with analysts, noting that “we had the four best-selling phones in urban China over the past year. I just took a trip there and I couldn't be more excited about the interactions I had with customers, employees and others.”
Wedbush analyst Dan Ives, a well-known Apple bull who gives an overweight rating to the stock, says weak demand in China is a “big fictitious story from the bears that is far from reality,” according to your company's tracking of sales for the December quarter.
“Apple remains our top tech pick with a strong iPhone 15 refresh cycle unfolding with a strong, 'drama-free' holiday season, which appears to be moving into 2024 despite growing noise and competition from Huawei in China,” said in a recent client. note.
“We also believe the Services business has returned to consistent double-digit growth and is worth between $1.5 trillion and $1.6 trillion on a standalone basis,” he added.
“Simply put, 2024 is the year for Cook & Co. to once again showcase iPhone growth and further monetize its gold installed base that Cupertino has built.”
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