Apple Stock Downgraded Due to Insufficient Growth Outlook and Lack of Catalysts

By Senad Karaahmetovic

Analysts at BNP Paribas Exane have downgraded Apple to Neutral from Outperform, adjusting their price target from $180 to $140 per share.

This change in rating and price target is attributed to reduced expectations for iPhone and Mac sales due to production issues at Foxconn’s main factory in China. Reports indicate that production at this facility has recently returned to 90% of full capacity.

The analysts now anticipate that Apple will ship 224 million iPhone units in 2023, a reduction influenced by supply chain challenges at Foxconn and a more conservative outlook on consumer spending for premium devices. Shipment estimates for iPads and Macs have also been lowered, with expectations of a 7% and 9% decline year-over-year, respectively.

Consequently, BNP Paribas Exane has revised its FY23-25 earnings per share estimates downward by approximately 6%, placing them 5%-6% below consensus levels.

The analysts noted in a client communication, “Consensus has started to trim estimates, and we believe this trend will continue, exerting downward pressure on the shares.”

Given these revised estimates, the analysts believe Apple stock is currently trading at a “premium valuation” that is difficult to justify.

They remarked, “We see little reason for Apple to trade at a premium compared to its peers, which are now valued at 22 times the estimated FY23 price-to-earnings ratio. With new hardware products such as AR/VFR and the Apple Car expected to debut no earlier than 2024-2026, we foresee no significant positive catalysts for the stock and believe the shares are fairly priced.”

In 2022, Apple’s stock experienced a nearly 27% decline.