ANOTHER WALL STREET analyst has lost confidence in Apple Inc (Nasdaq: AAPL) stock. Guggenheim is the latest of a handful of analysts to downgrade Apple stock in recent weeks over concerns about slumping iPhone sales.
On Wednesday, Guggenheim analyst Robert Cihra lowered his rating for AAPL stock from “buy” to “neutral” and said rising iPhone average sales prices (ASP) are no longer a good enough reason to buy the stock.
“Over the past 10 years, Apple’s iPhone ASP has increased a dramatic plus $220, or 40 percent, reflecting its growing value to both consumer and business markets, but nearly half of all that just came in FY18 alone, making a period of digestion now likely,” Cihra says.
The average price of an iPhone increased by about 17 percent in fiscal 2018.
Cihra says early indications from Apple suppliers suggest iPhone unit sales will drop significantly in fiscal 2019.
“We now estimate iPhone units (down) 5 percent year over year in FY19 versus flat year-over-year in FY18, but unlike last year, do not see ASP increases providing enough offset, with our forecast that blended iPhone ASPs increase only 3 percent year-over-year,” he says.
A 3 percent increase in ASPs combined with a 5 percent drop in unit sales will result in a 3 percent overall decline in iPhone revenue for Apple in fiscal 2019, he says.
Based on its latest estimates, Guggenheim has lowered its fiscal 2019 earnings per share forecast from $13.41 to $12.97. It has also dropped its revenue forecast by 2.8 percent from $281 billion to $273 billion.
Guggenheim is the third high-profile firm to downgrade AAPL stock this month following Bank of America and Rosenblatt Securities. Bank of America analyst Wamsi Mohan says Apple’s stock is still a solid value, but its earnings multiple could compress given stagnant iPhone revenue growth.
“Valuation metrics remain compelling for Apple, however in the last down-cycles, despite compelling valuation, the stock retraced 30 percent,” Mohan says.
“We expect a one to two times multiple compression in the near term to pressure the stock,” Mohan says.
Guggenheim has removed its previous $245 price target for Apple. Bank of America has…
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