Apple Stock: Expect Tough Love From Wall Street
Apple stock (AAPL) - Get Free Report is still highly rated by Wall Street. On average, analysts see shares of the Cupertino company as a “strong buy” and believe in 20% upside opportunity implied by the average target price of nearly $180 per share – all the data provided by TipRanks.
However, as much as the sell-side may appreciate Apple stock, analysts seem willing and ready to give it some tough love. Several of these experts have de-risked their expectations for the holiday quarter and early 2023 months. If more of them follow the trend, AAPL could take a hit.
Should investors worry? I think not, for the reasons presented below.
Figure 1: Apple Stock: Expect Tough Love From Wall Street
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Apple and a Challenging Environment for the iPhone
It all started with fiscal Q4 earnings, which we covered on this channel in real time. During the earnings call, CFO Luca Maestri guided revenue growth to decelerate relative to the pre-holiday quarter – granted, in great part due to FX impact that escapes Apple’s control.
CEO Tim Cook then spoke of iPhone Pro supply constraint, which cuts both ways: it bodes well for overwhelming demand, but ill for sales as the company can’t produce enough to meet consumers’ needs. Clearly, the environment has been challenging for the iPhone.
On the heels of mixed earnings results came even worse news: Apple’s preannouncement of weaker-than-expected iPhone 14 Pro and Pro Max sales in the upcoming quarter due to production issues in China.
This is probably the catalyst that led analysts to rethink their estimates of Apple’s financial results in the next few months.
On November 9, Bernstein’s Toni Sacconaghi pointed out that consensus was still too high, especially for the balance of fiscal 2023. In his view, iPhone sales missed due to supply chain issues may never be recovered, unlike what others on Wall Street seem to believe.
JPMorgan’s Samik Chatterjee followed suit and lowered his iPhone estimates on November 14, which seems to have triggered some temporary bearishness that pushed AAPL lower in pre-market trading. It is precisely this potential domino effect of estimate cuts that could put some pressure on Apple shares, which now trade at roughly $150.
AAPL: Is It Time to Fear?
Even though the stock market at large has rebounded strongly on the back of favorable inflation data in the past few days, I continue to think that this is a volatile environment. In the short term, I would not rule out (but neither would I root for) Apple stock U-turning and heading back towards 2022 lows.
In the long term, I still think that owning AAPL is a smart move. Therefore, any meaningful weakness in share price caused by expectations for weaker iPhone performance in the immediate term will likely prove to be an opportunity to buy.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)
