Apple, the world’s most valuable technology company, has been given a Sell rating by Lightshed Partners, a research firm. This downgrade comes as analysts predict a 20% downside risk to the stock’s value. The reason for this downgrade is primarily due to the expected underperformance of iPhone sales, which is likely to come in below analyst estimates.
The analysts at Lightshed Partners have slashed their rating on AAPL stock from Neutral to Sell, and they have set a price target of $120 per share. Their estimate implies a 20% downside risk. In a client note, the analysts explained that their estimates are below consensus due to the company’s more conservative outlook for iPhone sales and moderating growth expectations in Services revenue.
Moreover, the analysts believe that the smartphone replacement cycle is getting longer, and this trend is expected to continue into calendar year 2024. There are several reasons for this trend, including the flat or declining phone subsidies offered by wireless operators in 2023 and 2024, longer terms on phone payment plans, increased use of eSIM to activate new customers on existing phones, the lack of new meaningful applications driving interest in 5G, and potential economic weakness.
Lightshed’s iPhone revenue estimates are $6 billion and $17 billion below consensus for fiscal 2023 and 2024, respectively. The analysts believe that there is an increased risk to iPhone sales in China due to retaliation stemming from the worsening relationship between the US and Chinese governments.
The downgrade from Lightshed Partners could have a significant impact on the value of Apple stock, especially if other analysts follow suit. While Apple shares are currently trading flat in pre-market Friday, this could quickly change if investors start to sell their shares.
In conclusion, the downgrade of Apple stock by Lightshed Partners highlights the risks facing the technology giant. With expected underperformance in iPhone sales and moderating growth expectations in Services revenue, investors may be wise to take a cautious approach to Apple stock. The longer smartphone replacement cycle, coupled with potential economic weakness and the risk of retaliation from China, could further add to the downside risk.