BofA slashes Apple target $25 to $160

From Carmen Reinicke's "Bank of America downgrades Apple, says weak consumer will cause stock’s outperformance to end" ($) posted Thursday on CNBC Pro:

Apple got a rare downgrade Thursday, with Bank of America lowering its rating on the tech giant to neutral from buy, citing incremental risks to the company’s earnings going forward.

The bank also slashed its price target on the stock to $160 per share, implying upside of about 7%. Bank of America’s old target of $185 pointed to a more than 23% gain.

Apple shares slipped nearly 3% in premarket trading following the note.

“Shares have outperformed significantly YTD ... and have been perceived as a relative safe haven,” Wamsi Mohan wrote in a Thursday note. “However, we see risk to this outperformance over the next year, as we expect material negative est. revisions driven by weaker consumer demand.”

Downgrades to Neutral from Buy. Cuts target to $160 from $185.

My take: Trying to get my hands on the note.

6 Comments

  1. Dave Ryder said:
    Inevitable I suppose. I’ve been wondering if the estimates haven’t yet taken into account the macro conditions.

    (Doesn’t mean I’d sell, though)

    1
    September 29, 2022
    • Robert Paul Leitao said:
      Dave: You make an important point. Macro economic conditions are certainly a factor and this includes forex challenges as well as demand destruction from a slowing global economy. Apple’s top line growth is influenced by the pace at which hundreds of millions of the world’s citizens gain entry to the global middle class. Long-term these may not be big issues. But price targets present an analyst’s view of an equity’s valuation over the next 12 months. As interest rates rise, the present value of future earnings is diminished. However, interest rates will moderate over time and economic growth will eventually recover to a more stable trajectory.

      2
      September 29, 2022
      • Neal Guttenberg said:
        Robert,

        One of the things to also consider is that Apple gets at least a little buffer on interest rates with their cash hoard. If they can get 4%, that is an extra billion per quarter. All that may be counterbalanced by the strong dollar. Lots of push and pull at this point. I think most analysts are in guess mode right now. Very difficult to really predict. Will it come down to a coin flip for many of them as to what they are predicting as to what will be happening? Not just for Apple but for the rest of the market in general?

        0
        September 29, 2022
        • Robert Paul Leitao said:
          Neal: You make some good points. This is one analyst’s perspective in the market “conversation” about Apple. There’s nothing in the price target adjustment and narrative (from what I’ve seen) that suggests long-term or systemic challenges at Apple. There is a market-wide rerating of equities as interest rates rise and both domestic & global economic growth rates hit the skids. I’m not concerned about Apple’s share price today. I’m looking five years out.

          3
          September 29, 2022
  2. Kirk DeBernardi said:
    Man! Wish I had a dollar for every time some damn analyst cried out that a “weak consumer” was going to affect Apple’s sales in any material way.

    A classic trotted-out FUD about Apple that never seems to materialize and moreover illustrates Apple’s stoic business fundamentals and performance metrics that is so consistently admired by all.

    0
    September 30, 2022

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