Barclays Downgrades Apple (AAPL) to Equalweight, Concerned India/China Will not Emerge As Growth Catalysts
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Barclays downgraded Apple (NASDAQ: AAPL) from Overweight to Equalweight with a price target of $117.00 (from $119.00).
Analyst Mark Moskowitz comments in a 30 page note to clients that he sees no growth rebound and fails to recognize any "needle movers". He predicts there will be no meaning upside to Apple which will dampen Apple's relative outperformance potential. He does note that Apple's cash position and "sticky ecosystem" will help to limit the stock's downside potential.
Moskowitz comments "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."
He also is lowering Barclays Global Smartphone market forecasts.
Moskowitz says of his revisions: "Our revised C2017 global smartphone market revenue and unit growth estimates are for a decline of -0.4% and growth of +5.5%, vs. +4.4% and +7.8% previously. Meanwhile, our revised C2017 total iPhone revenue and unit growth estimates are 4.5% and 3.4%, vs. 7.0% and 5.9% previously."
Looking to the future, Moskowitz says the next leg of long-term growth opportunities will require some time to nurture and manifest. He comments "Long-term growth opportunities related to India, services, the enterprise, artificial intelligence, and maybe even the Cloud still exist; however, we do not expect these potential “what’s next?” opportunities to emerge as major needle movers over the next 12 months for Apple’s model."
Shares of Apple closed at $120.08 yesterday.
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