Apple’s price target cut by RBC Capital Markets

Concerns over weak demand for iPhones drive estimates lower

Should it stay below Microsoft through Tuesday’s close, it would mark the first time since 2013 that Apple has not had the largest stock on the market.

Should it stay below Microsoft through Tuesday’s close, it would mark the first time since 2013 that Apple has not had the largest stock on the market.

 

Apple’s price target was trimmed by RBC Capital Markets on Tuesday, the latest investment bank to cite concerns about weak demand for the company’s iPhone line, a factor that has pushed the technology bellwether into bear-market territory over the past several weeks.

“Given sustained data points around soft iPhone demand from supply-chain and others, we think it’s prudent to adjust estimates lower especially as it relates to March-quarter and beyond,” analyst Amit Daryanani wrote to clients.

While the stock has already seen pronounced weakness on this issue, “we think investors will wait for data-points/noise level to stabilise before getting more positive on the name”, something Mr Daryanani expects will happen in early 2019.

Mr Daryanani cut his price target to $235 (€207) from $240, compared with the average of $228 as compiled by Bloomberg, and also trimmed his 2019 estimates on the Dow component.

‘Aggressive’

Yet RBC affirmed its outperform rating on Apple, saying it remains a “core large-cap tech holding” in an “increasingly ‘risk-off’ environment,” given the company’s strong balance sheet and “aggressive” buyback programme.

The stock dropped 2.1 per cent before the bell, a decline that implied its market capitalisation would open below that of Microsoft. While Apple inched below that threshold on Monday afternoon, it still closed as the most valuable public company. Should it stay below Microsoft through Tuesday’s close, it would mark the first time since 2013 that Apple has not had the largest stock on the market.

Tariffs

Part of the pre-market weakness came after US president Donald Trump late on Monday suggested in comments to the Wall Street Journal that 10 per cent tariffs could be placed on mobile phones and laptops made in China, which would be another blow for chief executive Tim Cook.

“While we ultimately believe this is all part of a broader negotiation with China as talks heat up over the next week, now Cook and Apple find themselves squarely at the centre of the tariff talks which were previously background noise as investors try to gauge what a potential 10 per cent tariff on iPhones and other products would do to demand and unit growth over the next six to 12 months if ultimately imposed,” Wedbush analyst Daniel Ives wrote to clients.

Mr Ives, who rates the stock outperform, added that “the Street will not be taking this news lightly,” and that it “will surely add to this white knuckle period for Apple.”– Bloomberg