Apple Inc., once a darling of Wall Street, is facing a wave of skepticism as concerns over iPhone sales and a weak macro environment, particularly in China, have led to a second downgrade this week. Piper Sandler & Co.'s Harsh Kumar shifted his stance on Apple to neutral from overweight, a bullish view he had maintained since March 2020. This decision closely follows a similar move by Barclays Plc analysts led by Tim Long, who downgraded the tech giant to underweight on Tuesday.
Kumar cited dampened demand for iPhones due to the global economic slowdown, expressing concern over handset inventories and suggesting that "Growth rates have peaked for unit sales." He also remarked on a cautious outlook for the first half of 2024, particularly concerning the analog market and handset and consumer end markets. Reflecting these apprehensions, Kumar adjusted his price target for Apple stock to $205 from $220.
These recent downgrades have further eroded analysts' confidence in Apple, which was already the least favored among big tech stocks at the start of 2024 according to Bloomberg data. The company's buy-equivalent ratio is now at a three-year low, with only 33 buy-equivalent recommendations compared to the more bullish ratings for rivals like Amazon.com Inc., Meta Platforms Inc., and Nvidia Corp.
Despite a nearly 50% rally last year, Apple's stock has faltered in the early days of 2024, declining by 5.2% and erasing more than $155 billion in market value. The shares are teetering on the edge of oversold territory, continuing a downward trend for a fourth consecutive session. This is a stark contrast to the overall bullish sentiment on big tech stocks, highlighting the growing caution specifically surrounding Apple.
One of the critical factors contributing to this cautious stance is Apple's performance over the past four quarters, where it was the only big tech firm to see revenues contract. Wall Street's expectations for fiscal 2024 are modest, anticipating only 3.6% revenue growth and a 7.9% profit expansion.
The downgrades by Piper Sandler and Barclays reflect broader concerns over lackluster iPhone sales and sluggish sales in other hardware categories. Additionally, there's an expectation that Apple's services revenue growth will likely slow down, as noted by Barclays' Tim Long. As the tech giant grapples with these challenges, the market and industry observers are keenly watching how it navigates the changing economic landscape and evolving consumer preferences in a post-pandemic world.
