Analyst James Cordwell from Redburn Atlantic has downgraded Apple’s stock on Wednesday, citing increased competition as a major concern. Despite the downgrade, Cordwell maintains a target price of $200 for the shares.
As of afternoon trading, Apple’s stock was down 0.4% to $184.49, resulting in a year-to-date loss of 4.3%. In contrast, the S&P 500 experienced a 0.4% increase for the day.
In a research note, Cordwell expresses his belief that while the iPhone may experience growth in CY24, there is limited room for further upside over the next few years. Additionally, he anticipates an underwhelming March quarter, which could affect confidence in Apple’s outlook.
Notably, Cordwell highlights concerns about Apple’s competitive position in China, where companies like Huawei offer lower-cost alternatives that are gaining market share. Counterpoint Research data from Jan. 2 reveals that Apple’s share of the premium smartphone market decreased from 75% to 71% in 2023, while Huawei’s market share increased from 3% to 5%.
Considering the growing competition and geopolitical tensions impacting Apple’s environment, Cordwell suggests that China could potentially hinder Apple’s performance in the coming years.
Apple has not provided a comment at this time.
Apple Stock: Valuation and Analysts’ Opinions
Apple’s stock has reached a valuation that reflects its premium positioning in the market, according to experts. With the stock currently trading at approximately 27.6 times the per-share earnings forecasted for the upcoming year, it surpasses its five-year average of 24.2 times.
However, there seems to be a decline in the number of analysts who hold a positive outlook on Apple stock. Out of the 44 analysts tracked by FactSet, 25 rate the stock as a Buy, while 15 consider it a Hold, and four advise selling. In comparison, last year at this time, 30 out of 42 analysts recommended buying the stock, eight suggested holding it, and four had a bearish view.
One analyst, Amit Daryanani from Evercore, who has historically been bullish on Apple stock, believes that recent declines present an opportunity for investors to buy. In a note dated Jan. 6, Daryanani expressed understanding regarding concerns about iPhone demand but maintained that the stock is worth investing in. He rates Apple as Outperform, providing a target price of $220.
Daryanani also highlighted that although there is weaker demand in China due to Huawei’s competition, Apple is experiencing strength in the US and emerging markets like India. Furthermore, the analyst suggests that even if demand softens, Apple has various strategies to protect its bottom line and free cash flow through gross margin expansion and operating expense control.
In conclusion, while some market experts express caution about Apple stock, others see an opportunity for investors. The stock’s premium positioning adds to its appeal, and despite potential challenges, Apple seems well-equipped to navigate changing market conditions.