Analyst Rod Hall just issued a Sell rating on the stock and cut his 12-month price target $17 to (Street-low) $233.
From a note to clients that landed on my desktop Friday:
The negative impact of COVID-19 driven global social distancing on the broader economy and several of our companies’ end markets has been severe. However, we believe the debate over shorter term numbers for our stocks is evolving toward how company earnings will fare in 2021 as the world emerges from the initial impacts of the pandemic. We conclude that a number of our companies will be slower to recover with weakness persisting into 2021 even as our economists forecast a return to GDP growth in that year. Specifically, we expect consumer electronics demand to be slow to return and ASP weakness to persist well into 2021 similar to what we have observed in prior downturns.
Downgrading AAPL, LITE, NTNX, SONO and QCOM. We are downgrading AAPL, NTNX, SONO and QCOM to Sell (link to separate AAPL report) and LITE to Neutral. For AAPL, SONO and QCOM our 2021 forecasts are pacing well below consensus for various consumer demand related reasons with the main one being slower ASP and unit recovery than is generally expected. We have downgraded NTNX from Buy to Sell because we do not believe that company’s growth plans are sustainable in this environment and our new forecasts fall well below consensus as a result.
Goldman Sachs downgraded Apple to sell on Friday and cut its price target to $233 from $250, as it reduced its earnings estimates for a third time since Feb. 17. Analysts led by Rod Hall said they are modeling a far deeper reduction in unit demand through mid 2020 followed by a shallower recovery heading into 2021.
“We also assume some lingering ASP (average selling price) weakness as consumers look to economize similar to what we have seen in prior downturns,” they wrote in a note to clients. “In addition to this we believe that Services growth slows substantially in 2021 and that Services as a percentage of revenue actually stagnates in that year.” Goldman is expecting a 36% decline in iPhone unit demand in the second quarter and a 24% decline in the first half of calendar 2020.
Analysts are expecting the company’s other products to experience a similar trajectory. “There are multiple examples of ASPs dropping in the midst of a recession and then remaining weak well beyond the point when units recover,” said the note. Price weakness could affect 5G design choices too, and limited global travel may cause the delay of the launch of this year’s updated iPhone, it said.
Downgrades rating to Sell from Neutral, lowers price target to $233 from $250.
My take: Hall is happiest when he’s underwater on Apple