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Apple Stock Faces Downgrade Amid Growth Concerns
3 Aug
Summary
- Analyst flags slowing hardware growth and rising costs.
- Third-quarter earnings surpassed estimates but included tariff refunds.
- Price targets imply significant downside from current levels.
Apple is now facing a more cautious outlook from KeyBanc following its latest earnings report. Analyst Brandon Nispel has warned that a combination of slowing hardware growth and rising operational costs could negatively impact the stock's performance.
The company recently reported fiscal third-quarter earnings that exceeded expectations, with earnings per share of $2.02 on revenue of $109.42 billion. However, it was noted that $0.11 of the earnings per share resulted from tariff refunds. Management also highlighted upcoming supply constraints, currency effects, and increased memory costs as factors to watch.
Nispel believes Apple may be entering a period of diminished iPhone growth. He suggests that increased product pricing, partly intended to offset rising component expenses, might lead consumers to postpone upgrades, thereby affecting device sales volumes. The analyst has assigned Apple an 'Underweight' rating with a price target of $250, indicating a potential 19% decrease from its current trading price.
Further concerns are raised about Apple's valuation, which stands at approximately 37 times Nispel's fiscal 2027 earnings estimate. This valuation leaves less room for error in the face of potentially weaker growth. Additionally, pressure from wireless carriers, who might reduce promotional subsidies, could further extend replacement cycles and dampen hardware demand.
