Apple Inc. (Nasdaq: AAPL) investors took another blow from Wall Street on Wednesday when BMO Capital Markets downgraded the stock ahead of its highly anticipated fiscal first-quarter earnings report scheduled for Feb. 1.
BMO analyst Tim Long is the latest of a growing handful of analysts questioning Apple’s iPhone sales and revenue guidance, but several other analysts are still stepping up to defend the stock.
Long says his downgrade comes following reports that Apple has aggressively cut iPhone X orders. He now says Apple’s revenue guidance is at risk.
“We expect a meaningful guide lower when the company reports on Thursday night, on the order of $5 to $6 billion compared to consensus revenue estimates,” Long says.
While the global iPhone user base is still growing, Long says users are keeping their devices longer, a trend that could continue in 2018 if the next model iPhones are not particularly impressive. He also says Apple may finally be losing its iPhone pricing power.
“Following 10 years where [average selling prices] have generally moved higher, we believe prices will plateau as with the rest of the industry,” Long says.
BMO has downgraded Apple stock from “outperform” to “market perform” and lowered its price target for the stock from $199 to $162, but there are other analysts who still see Apple as a solid investment.
Bank of America analyst Wamsi Mohan says Apple’s long-term future is more dependent on its Services segment than its hardware sales.
“Assuming $19 in net cash/share, $103/share for a no-growth hardware business and $57/share for a base case services business, implies that the stock is already discounting a declining hardware business and a worse than run rate trajectory for services,” Mohan says.
Bank of America predicts Apple will miss consensus iPhone unit sales estimates in fiscal 2018, but Mohan says higher iPhone prices and gross margins will support the stock. “Given the concern of a guide down based on lower volumes of iPhone X, we view the setup into earnings as favorable,” Mohan says.
On Tuesday, Piper Jaffray analyst Craig Johnson said Apple remains a value compared to other tech companies reporting earnings this week.
“Clearly it’s a great company,” Johnson said on CNBC. “It hasn’t gotten…
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