The Ratings Game: Apple’s slowdown era rages on, and the iPhone may not be enough to power its stock


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With Apple Inc. still in its no-growth era, how should investors think about its stock?

At least one analyst saw fit to move to a more cautious stance on the name in the wake of Apple’s
latest report, which brought the third quarter in a row of revenue declines and commentary suggesting another could be on the way.

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Apple’s most recent report “highlights the slowdown phase in which Apple now sits,” wrote Rosenblatt Securities analyst Barton Crockett, who lowered his rating on Apple shares to neutral from buy Thursday while maintaining a $198 price target.

The iPhone stands as “the most important device of the modern economy,” but that may not be enough to help the stock, Crockett cautioned.

“[A] slowdown in the U.S. seems likely to last until a material new product category takes hold,” he wrote. “And that is uncertain both in timing and success, leaving little reason to favor shares now trading near peak absolute and relative multiples.”

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UBS analyst David Vogt was cautious as well as he tried to read between the lines of Apple’s forward-looking commentary. The company doesn’t give traditional guidance, though management offered various nuggets, including expectations for similar revenue performance in the September quarter compared what was seen in the June quarter, an acceleration in iPhone and services revenue relative to the June quarter, and double-digit year-over-year declines in iPads and Macs.

While bulls will say the iPad and Mac weakness is “transitory” due to tough comparisons, Vogt thinks foreign-exchange trends, not demand shifts, will be behind any iPhone improvements.

“Therefore, on a constant-currency basis, we expect both iPhone and Services growth in [September] to be similar to June,” with “no acceleration,” which is “disappointing,” in his view.

He set a neutral rating and $190 target price on shares of Apple.

JPMorgan’s Samik Chatterjee was more upbeat, writing that “the softer top-line guidance partly explained by the greater-than-anticipated [currency] headwinds has limited implications in relation to our expectations for modest earnings growth” in the September quarter.

He said he is optimistic about the company’s longer-term story as well.

“We continue to view the set up into [fiscal 2024 for Apple to be positive with likely improvements in consumer spending from trough levels, which will return the company to healthy revenue and robust earnings growth, and drive an outperformance for the shares, led by increased appreciation from investors of the high predictability of outcomes,” Chatterjee wrote as he stuck with an overweight rating and $235 target.

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Oppenheimer’s Martin Yang also urged patience, writing that Apple’s “stagnating” revenue growth in the present is “not a cause for concern” as he thinks about the company’s long-run opportunities.

“The lack of growth in [fiscal 2023] so far is understandable cause for concern over Apple’s ability to grow and justify its elevated multiple,” he wrote, but “such fear is immature, based on Apple’s stronger competitive position in hardware, unfavorable near-term macro factors, and durable high-margin revenue growth from Services.”

Yang continues to have “conviction” in Apple’s ability to post “superior long-term profit growth from hardware and services market-share gain,” while the company’s expansion of its total addressable market is “intact despite slower revenue growth in the near term.”

He rated the stock at outperform and raised his price target to $220 from $195 Friday.

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Alexandra Williams
Alexandra Williams
Alexandra Williams is a writer and editor. Angeles. She writes about politics, art, and culture for LinkDaddy News.

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