Wall Street Analysts Concerned as Apple’s Revenue Declines

by Warren Seah

A third consecutive quarter of declining revenue from Apple has raised concerns among Wall Street analysts regarding the company’s stock. Given its extended valuation and slowing iPhone sales, there are at least two compelling reasons to avoid buying the dip.

In the June quarter, Apple (ticker: AAPL) experienced a slight decline in sales, and the company’s guidance for the current quarter indicates a similar trajectory, which left investors disappointed.

Tom Forte from D.A. Davidson expressed reservations about backing the stock at its current premium valuation, claiming that Apple’s forecasts were insufficient to justify such a move. Additionally, Forte pointed out that while the forthcoming iPhone 15 is cause for excitement, wireless carriers may not offer as much subsidy for the smartphone as they have for previous Apple models in their efforts to promote 5G network usage.

“We will closely monitor the performance of the iPhone 15; however, we were encouraged by the comments made regarding China and India,” Forte wrote in his analysis.

As a result, D.A. Davidson analysts have revised their target price for Apple to $180 from $185 and maintained a Neutral rating on the stock.

Apple shares experienced a 1.4% decrease in premarket trading on Friday, despite a 47% year-to-date increase as of Thursday’s closing.

Apple Faces Potential Weakness in U.S. Smartphone Market

Recently, analysts have been closely examining Apple’s latest forecasts and have raised concerns about the lukewarm upgrade cycle among American smartphone users. The potential slowdown in upgrade rates is expected to negatively impact Apple’s revenue in the Americas region. Brandon Nispel from KeyBanc, while retaining an Overweight rating on Apple stock, expressed apprehension about the company’s valuation. He highlighted that Apple’s enterprise value multiple of 21 times its expected Ebitda in 2024 is higher than its three-year average of 18 times, suggesting a stretched valuation.

Despite these concerns, there are optimistic perspectives that focus on Apple’s future prospects. Analysts believe that by shifting the focus beyond the current quarter, investors should be considering the launch of the highly anticipated iPhone 15 and the continuous growth in Apple’s services revenue. In the previous quarter, services revenue experienced an 8% increase compared to the same period in the previous year. Daniel Ives from Wedbush reaffirmed his positive outlook by reiterating an Outperform rating and setting a target price of $220 for Apple stock.

Overall, while acknowledging potential weaknesses in the short term, analysts maintain that the future holds promise for Apple. Investors are advised to pay attention to the upcoming launch of the iPhone 15 and the company’s consistent growth in services revenue.

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