Shares of Apple are running out of room to grow in the near-term, according to Bank of America. The bank on Thursday downgraded the tech giant to neutral from buy and cut its price target on the stock to $160 to $185, citing the stock’s recent outperformance and incremental risk to earnings and valuation in the near-term. The new price target implies shares have about 7% upside as opposed to the previous target, which saw them surging more than 23%. Apple shares slipped nearly 3% in premarket trading following the note. “Shares have outperformed significantly YTD (AAPL down 16%, S15INFT down 29%) and have been perceived as a relative safe haven,” Wamsi Mohan wrote in a Thursday note. “However, we see risk to this outperformance over the next year, as we expect material negative est. revisions driven by weaker consumer demand.” The firm also cut its estimates for 2023 full-year earnings per share, now forecasting EPS of $5.87 down from its previous estimate of EPS of $6.24. Bank of America sees many short-term risks to Apple given a weaker macroeconomic outlook. The group sees the potential for a weaker iPhone 14 cycle as consumer spending takes a hit, especially in Europe, and points to moderating lead time data for Pro models. The firm worries that a stronger mix of Pro models won’t offset a decline in revenue and profit if overall units decline. There may also be a weaker near-term trajectory for services, stock performance correlated to gross profit dollars likely to decline in the coming years, a reversion to pre-Covid levels for iPads and partially for Macs as well as currency headwinds from a stronger dollar. “Other risks are potential trade conflicts, tariffs, longer iPhone replacement cycles, commoditization in the smartphone market, intensifying competition in the tablet market, ability to manage beat and raise expectations for EPS estimates, and requirement to maintain pace of product innovation,” Mohan wrote. —CNBC’s Michael Bloom contributed to this report.
