The Club woke up Thursday morning to dueling Wall Street research notes on Apple (APPL) in the wake of a report that the tech giant may be canceling plans to increase production of its upcoming iPhone 14. Despite the conflicting results, we are not too concerned. about Apple’s manufacturing capacity and continue to support inventory. What Bank of America Says On the one hand, Bank of America downgraded Apple stocks from buy to neutral, lowering their $185 price target from $185 to $160 in response to dwindling consumer demand. In addition to the risk of a weaker iPhone 14 cycle, the note signaled a slowdown in services revenue, an expected decline in gross profit in the coming quarters, a return to pre-Covid demand levels for iPads and partly for Macs, and the negative impact of a strong dollar on international demand. “What we’re seeing is that consumer spending is really starting to slow down… demand is slowing down and that’s the biggest concern,” BofA analyst Wamsi Mohan told CNBC on Thursday. Apple’s stock, which has fallen more than 19% so far, was trading close to 5% on Thursday afternoon. Shares ended just 1.2% lower on Wednesday but were much lower earlier in the session. The stock made a real run from its early January highs during the summer rally that started in mid-June and ended in mid-August. What Rosenblatt Says Rosenblatt Securities has upgraded Apple stock to buy from neutral, raising their price target from $160 to $189. Rosenblatt analysts cited the bank’s survey of more than 1,100 U.S. adults, who showed “significant interest” in the company’s new iPhone 14 Pro Max and Ultra watches. Speaking of the higher demand mix, the analysts noted that two-thirds of respondents planned to buy either the Pro Max (40%) or Pro (26%) models. Perhaps more importantly for the long-term investor concerned about Apple’s ability to grow its services revenue, the Rosenblatt survey revealed that “18% of Android respondents said they already had or expect to have an iPhone 14 in the market.” next 12 months.” As for watches, 23% of respondents “had already ordered or expect to have one in the next 12 months”, while 47% “of those expecting to buy one of the devices said they plan to use Ultra. ” That is a very positive development that could lead to a sharp increase in the average selling price of the high-end watch. “These devices are something that consumers really want, based on our research work,” Rosenblatt analyst Barton Crockett told CNBC on Thursday, adding that Apple was the “top of what consumers want to spend money on in this environment.” The club’s view We think Bank of America is right to highlight a strong dollar as a real risk to international demand. But that said, even the BofA analysts admitted that their concerns are more about the near-term valuation than the company’s long-term prospects. “While Apple’s long-term outlook remains favourable, we see increasing risk to earnings and valuation in the near term,” the note said. Indeed, that’s why there’s no change in our view that regardless of how absolute demand for the iPhone 14 ultimately plays out, investors would do well to own Apple for the long haul, rather than try to trade the cycle. . Longer-term value creation is related more to the overall growth in the number of installed devices than to the number of phones Apple can sell at launch. We think the installed base will likely continue to grow as Apple’s ecosystem continues to strengthen. In addition, management’s “net cash neutral over time” strategy supports earnings growth even if revenue growth stagnates for a while. In this unforgiving bear market, it’s worth bearing in mind that the lower Apple’s stock price in the short term, the more shares the company can buy back with its buyback authorization program — and as a result, the more the patient investor will in the long run. owner of the entire company. (Jim Cramer’s Charitable Trust is long APPL. See a full list of the stocks here.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charity’s portfolio. If Jim has talked about a stock on CNBC TV, he will wait 72 hours after issuing the trade warning before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO CONFIDENTIAL OBLIGATION OR DUTY EXISTS OR IS CREATED BY YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO PARTICULAR OUTCOME OR PROFIT IS GUARANTEED.
Customers queue at the Apple Fifth Avenue store for the release of the Apple iPhone 14 in New York City, September 16, 2022.
Andrew Kelly | Reuters
The Club woke up Thursday morning to dueling Wall Street research notes on Apple (APPL) in the wake of a report that the tech giant may be canceling plans to increase production of its upcoming iPhone 14. Despite the conflicting results, we are not too concerned. about Apple’s manufacturing capacity and continue to support inventory.