Piper Sandler downgraded the rating of Apple Inc
Analyst Harsh Kumar cited potential issues surrounding soft smartphone sales and macroeconomic vulnerabilities in the first half of 2024. Consequently, Apple stock extended declines on Thursday.
Kumar also expressed apprehensions about iPhone inventories entering the year and highlighted a potential peak in unit sales growth rates. This concern has led to a reduction in the price target for Apple stock from $220 to $205.
Furthermore, Piper Sandler's analysis highlights global weak smartphone demand, high stock valuation, and macroeconomic uncertainties affecting investor sentiment in 2024. The first six months are expected to be challenging for consumers worldwide. This creates vulnerabilities in industries reliant on semiconductors and smartphones.
The report emphasized the potential risks of large inventories affecting Apple's margins and earnings per share if product sales dip. Concerns also loom over Apple's growth reaching a zenith in unit sales. This is compounded by a deteriorating macro environment in China that might impact the company's high-end iPhone business.
Strategic elements, like Apple's involvement in Taiwan and the escalating tensions between Beijing and Washington, add to the broader context. The company, housing major manufacturing hubs in mainland China, might face risks to its supply chain.
Kumar also flagged the semiconductor market and broader macroeconomic uncertainties. Expect a challenging handset market in the first half of 2024, he added.
A potential increase in RAM and Flash chip pricing is also likely.
On Tuesday, Barclays analyst Tim Long also downgraded Apple's stock from neutral to underweight. Long cited a lack of forthcoming catalysts for the consumer electronics giant. Long highlighted lackluster iPhone sales and sluggish performance in other hardware categories, anticipating a slowdown in Apple's services revenue growth.
With both major investment banks expressing caution, Apple faces a testing period, navigating challenges in demand, macroeconomic trends, and geopolitical factors, ultimately shaping the company's trajectory in the year ahead.
