Once again, we’re talking about Apple (AAPL) being in unchartered territory – but this time, it’s not in a good way.
The tech giant, which recently became the first company ever to be valued at $1 trillion, has shed more than $200 billion in market cap over the past two months, which has shown investors the company is not an invincible as once thought. Apple’s recent slide has analysts rethinking their recommendations, including Jun Zhang of Rosenblatt Securities; Zhang remains Neutral on Apple but has lowered his price target to $165, down more than $10 from its current level. (To watch Zhang’s track record, click here)
Zhang believes “Apple’s iPhone production will remain stable for the December and March quarters” but expects iPhone XR and XS to decrease “slightly” after the holiday season. Zhang expects iPhone X and XR sales to be comparable to that of XS and XS Max sales, but only because of “promotions for the X and XR” models. The analyst implies that without these promotions, Apple’s sales would not be as high.
Aside from the iPhone, which is the company’s most important product, Zhang cites sluggish iPad Pro sales as another reason for the target adjustment. The analyst believes that Apple’s “price range (has impacted) customer upgrades”, though “does not believe the company will change its strategy in the near term.”
Zhang’s rationale for decreasing his price target hinges on Apple’s revenue growth – or lack thereof. Zhang has lowered his FY19 revenue estimates to $269 billion, from $272.3 billion, while reducing gross margins 1.5%. Furthermore, Zhang “expects very little revenue growth from (Apple)” in FY20 “mainly due to challenges in the smartphone market”. Zhang’s FY20 revenue estimate is $270 billion, less than 1% higher than his FY19 estimate.
TipRanks has compiled 33 analyst ratings for Apple and Zhang’s price target of $165 is the lowest by $10. In fact, the average price target is $230.50, more than 30% higher than the current price of the stock. Of the 33 analysts, more than half (18) have recommended a Buy rating, while 14 remain sidelined and only one recommends Sell.