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…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
