There is growing unease among Wall Street analysts as Apple experiences its third consecutive quarter of declining revenue. Despite the stock reaching near-record highs, caution is warranted.
In the June quarter, Apple (ticker: AAPL) reported a slight decrease in sales, and its revenue projections for the current quarter fell short of expectations, disappointing investors.
According to Tom Forte from D.A. Davidson, Apple’s forecasts failed to convince him to support the stock at its current premium valuation. Forte also expressed concerns that wireless carriers might not subsidize the upcoming iPhone 15 as much as they did with previous Apple models in order to boost the adoption of 5G networks.
“While we remain excited about the impending release of the iPhone 15, it is important to note that wireless carriers may not offer the same level of subsidies as before,” Forte stated.
On a positive note, Forte mentioned that he found reassurance in Apple’s plans for the China and India markets.
D.A. Davidson analysts have revised their target price for Apple to $180 from $185 while maintaining a Neutral rating on the stock.
Apple shares recorded a 1.4% decline in premarket trading on Friday. However, it’s worth noting that the stock has enjoyed a remarkable 47% increase so far this year, as of Thursday’s closing bell.
Smartphone Upgrade Cycle Slows Down in the US, Potentially Impacting Apple’s Revenue
Analysts are paying close attention to the US market, as Apple’s latest forecasts indicate a slowdown in the rate at which American smartphone users upgrade their devices.
According to Brandon Nispel from KeyBanc, the upgrade cycle in the US seems to be coming to a halt, as upgrade rates hit record lows. This trend could potentially result in weaker revenue figures for Apple in the Americas region.
Despite this concern, Nispel maintains an Overweight rating on Apple stock, along with a target price of $200. However, he does acknowledge that the company’s valuation is beginning to appear stretched. Currently, Apple’s enterprise value multiple stands at 21 times its expected Ebitda in 2024, compared to a three-year average of 18 times.
On the positive side, proponents of Apple’s stock argue that we should look beyond the current quarter and focus on the forthcoming launch of the iPhone 15. Additionally, the growth in services revenue, which increased by 8% compared to the same period last year, provides further optimism.
Daniel Ives from Wedbush reiterates an Outperform rating and a $220 target price on Apple stock. He believes that any weakness in the market presents an opportunity for investors. Ives confidently predicts that the upcoming release of the iPhone 15 in mid-September will kickstart a mini supercycle, driving further growth for the company.
In conclusion, while concerns arise regarding the sluggish smartphone upgrade cycle in the US, some analysts remain confident in Apple’s future prospects. As investors eagerly await the release of the iPhone 15 and potential revenue growth from services, they cautiously monitor the company’s stock performance.
