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Barclays reiterated its Underweight rating on Apple (NASDAQ:AAPL) ahead of earnings.
The stock fell 1% on Monday as the bank called the newest iteration of the iPhone “lackluster” and forecast the same reaction to the next generation.
For the December quarter, the tech giant is expected to report results in line with analyst estimates, while guidance for the current quarter is likely to miss estimates on softening hardware demand, which would continue a multi-quarter trend for AAPL.
Apple is set to report quarterly earnings on February 1 with earnings per share of $2.10 and sales of $118.26B.
The bank called sell-side consensus estimates too high for hardware for the current quarter with its latest checks indicating that iPhone 15 sell-through in China continues to show strong declines on a year-over-year basis. More base models are selling, leading to a negative mix shift and margin headwinds, analysts Tim Long and George Wang wrote in a note.
Apple may talk up initial orders for the Vision Pro, but “we see the product as immaterial to financial results for at least this year and next,” the analysts said. “Other hardware categories should remain weak, and we don’t see Services growing more than 10%. We expect reversion after a year when most quarters were missed and the stock outperformed.”
The consumer spending backdrop is weaker in general and there is likely to be pressure on estimates and valuation ratios ahead, the team said. The stock rose more than 50% in 2023.
iPhone sales for the March quarter are expected by Barclays at 52M to the Street’s 54-55M amid the “elongation” of replacement cycles and upgrades at all-time lows in the U.S.
Apple has 19 Buy ratings from Wall Street analysts, seven Buys, 14 Holds, three Sells and one Strong Sell.
