Among Wall Street experts, the consensus for Apple‘s (AAPL) – Get Apple Inc. Report stock is mostly bullish. Although shares are down roughly 20% since the beginning of the year, it’s hard to bet against the robust fundamentals of the largest American company by market cap.
But continuing macroeconomic challenges and weaker demand for certain Apple devices have forced even bullish experts to reduce their price targets on AAPL.
Figure 1: Apple Stock: Should Investors Worry About Price Target Cuts?
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(Read more from Apple Maven: Buy Apple Stock In July?)
Citi: Apple Phones Last Too Long
Citi analyst Jim Suva recently cut his price target on Apple from $200 to a still-bullish $175. Suva lowered his price target due to factors such as foreign exchange headwinds and concerns that Apple’s Russian exodus will hurt the company’s growth.
But according to Suva, the biggest short-term concern for Apple’s stock is the potential lengthening of device replacement cycles. According to reports, users now tend to go four years without upgrading their smartphones.
Combined with weaker consumer spending due to inflation, this could put negative pressure on iPhone shipments and result in fewer units sold.
However, the analyst listed five good reasons to remain bullish on Apple:
- The launch of the iPhone 14 in September and the debut of a foldable phone in 2023
- A product mix that deviates from lower-priced Android models
- Apple’s plans to buy back about $90 billion in stock
- Apple’s “sticky” service revenues
- Upcoming releases such as virtual reality/augmented reality (VR/AR) products and the Apple Car, which are not yet reflected in the company’s market cap
KeyBanc: Concerned About Apple’s Hardware Revenue
KeyBanc’s Brandon Nispel cut his price target on Apple from $191 to $173. But despite his lowered outlook, Nispel remains an Apple bull. He believes that holding onto the stock is the best approach.
The analyst’s current concern is that, for its fiscal third quarter, Apple will report hardware revenue below Wall Street forecasts. Nispel expects the quarter to have been difficult for Apple, but he also believes that this difficulty has already been priced into the stock. And he believes that supply-chain issues caused by COVID lockdowns in China are easing.
The Cuts Don’t Stop There
Goldman Sachs and Monness, Crespi, Hardt & Co. also recently cut their price targets on Apple by the double digits. Their analysts expressed concern about upcoming earnings and warned that there may be additional hazards in coming quarters.
However, even though Wall Street is concerned about the demand for Apple devices, history indicates that July can be a good time to buy Apple shares. Historically speaking, for the past decade, AAPL has outperformed the S&P 500 by 5% in July and August.
This positive performance is likely correlated to increased investor sentiment before two major calendar events: the launch of a new iPhone model (usually in September) and the holiday shopping season.
Investors tend to snap up shares of Apple leading into these key events, effectively “buying the rumor.” However, they also tend to “sell the news,” which is why Apple has historically performed poorly during the final months of the year.
However, the bearish macro scenario, which indicates that inflation is still on the rise, keeps weighing negatively on consumer spending and raises questions whether the September iPhone launch will be enough to lift the stock.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Apple Maven)
