Apple’s fiscal second quarter sales fell slightly, and its revenue expectations for this quarter were also disappointing, prompting Apple’s stock price to plummet 4.8% on Friday (4th), the highest single-day drop in ten months, and its market value evaporated overnight. 160 billion U.S. dollars, falling out of the “3 trillion U.S. dollar club.”
Apple’s third straight quarter of declining revenue has unnerved some Wall Street analysts. Wall Street analysts see these as at least two reasons not to buy the stock as Apple’s valuation expands and iPhone sales slow.
Apple’s stock price plummeted 4.8% to $181.99 per share on Friday, ushering in the worst day so far in 2023 and the biggest drop since September 29 last year, but the stock has risen more than 45% so far this year.
Apple’s iPhone sales and revenue decline for three consecutive quarters (Photo: appleinsider)
DA Davidson analyst Tom Forte said Apple’s forecast doesn’t provide enough reason to support the stock’s current premium valuation.
He also said that while the upcoming iPhone 15 is exciting, telecom operators may not have much to offer as they push people to use 5G networks.
“Overall, we’ll be keeping a close eye on iPhone 15 performance, but sales to China and India are reassuring,” Forte wrote.
DA Davidson analysts cut Apple’s price target to $180 from $185 and maintained a “neutral” rating on the stock.
While Apple’s potential in India has been a focus for bulls, analysts at UBS say it’s a mistake to often compare Apple’s growth in India to Apple’s growth in China. They point out that India’s smartphone market is about half the size of China’s, with lower demand for high-end devices.
Apple’s market potential in India has been a focus of bulls (Photo: Appleinsider)
UBS analyst David Vogt said: “Markets such as India will grow in the long term as regional economies improve, but we believe Apple is unlikely to achieve the volume success it has in China over the next few years.”
Vogt maintains a “neutral” rating on Apple stock and a $190 price target, noting that Apple’s premium has reached as high as 50%, the highest in a decade.
Other bearish analysts focused on U.S. markets. KeyBanc analysts said Apple’s latest forecasts suggest that U.S. smartphone users are not upgrading their devices as quickly as expected.
“We are concerned that the U.S. upgrade cycle is coming to a halt, with upgrade rates at record lows, which could lead to weaker U.S. revenue,” wrote KeyBanc analyst Brandon Nispel.
Nispel maintained an “overweight” rating on Apple stock and a $200 price target. However, he pointed out that the valuation is too high, with Apple’s enterprise value (EV) estimated at 21 times estimated 2024 Ebitda (earnings before interest, taxes, depreciation and amortization) in 2024, and this valuation level Starting to look far-fetched, especially when compared to the 18x average over the past three years.
Apple bulls are focusing on the launch of the iPhone 15 and growing services revenue. Apple’s service revenue in the third quarter ended July 1 increased by 8.2%, and the growth rate continued to maintain single digits, highlighting that the software business has a certain degree of risk resistance. When hardware revenue declines, Apple’s software services can still maintain increase.
Daniel Ives, an Apple bull and Wedbush analyst at investment bank, mentioned: “Overall, we will buy on dips, because the iPhone 15 mini super cycle will take root in mid-September, and now the prelude to the good show is about to sound.”
Ives reiterated his “overweight” rating on Apple and raised his target price from $220 to $230.
2023-08-05 01:06:42
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