In a move that many acolytes will find heretical and thus entirely unacceptable, Barclays is out with an Apple downgrade on Tuesday.
Consumers, Barclays says, are opting for earlier model iPhones (“mixing down”, they call it) versus the late models. Apparently that introduces risk around the 8 launch.
It’s a painfully long note (there’s even a “geopolitical” risk section), so I’ll just hit you with the highlights.
Oh, and for the rabid Apple fans, remember that I’m just the messenger here – and one does not shoot the messenger…
Apple, Inc. Downgrade to Equal Weight
No Growth Rebound or Needle Movers
We are downgrading Apple to Equal Weight and lower our price target to $117 from $119. This call is not on the quarter. Despite easier comps approaching, we do not expect meaningful upside potential in the model and thereby consensus estimates for C2017, limiting the stock’s relative outperformance potential – hence, the downgrade.
Apple has a sticky ecosystem and large cash balance, though, providing decent downside support for long-term investors. Growth rebound could be elusive. Our chief concern is that investors increasingly are hoping for a meaningful exit rate (i.e., 10%-plus Y/Y unit growth) led by the iPhone 8 cycle in 2H C2017. Our view is that customers increasingly mixing down (IP6S in favor of IP7) and maturation of the device-centric consumer electronics adoption wave could weigh on both Apple and the smartphone market. We also are concerned about China and India not emerging as growth catalysts in the next 12 months.