Citi reduces AAPL target to $200, because 'trade wars are bad for tech stocks'
The recent trend of analysts and investment firms cutting their share price targets for Apple has continued, with Citi cutting its expectations for Apple's stock to $200 and suggesting the price could drop further in the future, as low as $125.
iPhone XS Max
In a note to investors seen by AppleInsider, Citi advised it does not expect Apple will miss its sales guidance for the next quarter, but it does anticipate the figure to be closer to its forecast of $89 billion in revenue than the higher-end $93 billion.
The problem again seems to be one of seemingly over-anticipated demand for the current generation of iPhones, with newer models like the iPhone XS, and iPhone XR seemingly not keeping up to analyst expectations, and some suppliers warning of reduced revenues from cut orders. Older iPhones are seen to be more of an attractive purchase for some consumers compared to the new releases.
"We have found the legacy iPhones are doing better than expected due to the price reductions, which makes the legacy iPhones more affordable in developing countries," wrote Citi.
The ongoing trade war between the United States and Apple was also touched on in the note, with analysts suggesting that, while the United States has considered applying tariffs to iPhone imports, "we do not expect China to ban or impose additional tariffs on Apple."
"However, we note that should this occur, Apple has material exposure to China," claims Citi. In theory, this exposure represents some 18 percent of Apple's total sales, which could be majorly affected if tariffs are applied by either side.
The trade war is the biggest concern for Citi, prompting it to reduce its price target for Apple from $240 down to $200. "Trade wars are bad for tech stocks," the firm added.
While currently setting the price target at $200, Citi also mused on where the price could end up based on predictions. In a bear case, if Apple's revenue growth slowed down to between 2 percent and 3 percent a year, and suffered from weaker gross margins than forecast, the stock price could fall as low as $125 per share.
"For the stock to move higher, we believe investors will await for consensus estimates to move lower," suggests Citi.
Citi is the latest firm to cut its estimates for Apple's stock price target in the last few weeks, with takes from Morgan Stanley, UBS, Rosenblatt Securities, HSBC, and Guggenheim Securities all hammering the company over reduced hardware unit growth and a belief the high average selling price for iPhones will not be sustainable.
iPhone XS Max
In a note to investors seen by AppleInsider, Citi advised it does not expect Apple will miss its sales guidance for the next quarter, but it does anticipate the figure to be closer to its forecast of $89 billion in revenue than the higher-end $93 billion.
The problem again seems to be one of seemingly over-anticipated demand for the current generation of iPhones, with newer models like the iPhone XS, and iPhone XR seemingly not keeping up to analyst expectations, and some suppliers warning of reduced revenues from cut orders. Older iPhones are seen to be more of an attractive purchase for some consumers compared to the new releases.
"We have found the legacy iPhones are doing better than expected due to the price reductions, which makes the legacy iPhones more affordable in developing countries," wrote Citi.
The ongoing trade war between the United States and Apple was also touched on in the note, with analysts suggesting that, while the United States has considered applying tariffs to iPhone imports, "we do not expect China to ban or impose additional tariffs on Apple."
"However, we note that should this occur, Apple has material exposure to China," claims Citi. In theory, this exposure represents some 18 percent of Apple's total sales, which could be majorly affected if tariffs are applied by either side.
The trade war is the biggest concern for Citi, prompting it to reduce its price target for Apple from $240 down to $200. "Trade wars are bad for tech stocks," the firm added.
While currently setting the price target at $200, Citi also mused on where the price could end up based on predictions. In a bear case, if Apple's revenue growth slowed down to between 2 percent and 3 percent a year, and suffered from weaker gross margins than forecast, the stock price could fall as low as $125 per share.
"For the stock to move higher, we believe investors will await for consensus estimates to move lower," suggests Citi.
Citi is the latest firm to cut its estimates for Apple's stock price target in the last few weeks, with takes from Morgan Stanley, UBS, Rosenblatt Securities, HSBC, and Guggenheim Securities all hammering the company over reduced hardware unit growth and a belief the high average selling price for iPhones will not be sustainable.
Comments
Whether or not we think it's prudent policy, it's fair to call it a trade war.
Hopefully no one will follow your ill advised advice of selling low without first seeking out someone who knows what their talking about, investment wise.
That’s the top-tier offering. Do you need the top-tier offering? If not, why is that noteworthy?
I don’t need top-tier powertools and routinely buy lesser offerings. So?
More pointless pearl clutching. Yawn.
"Microsoft, and now Amazon have a higher market cap than Apple. Soon Alphabet/Google will too." @rogifan_new ;
These companies are basically service companies with little to no impact from tariffs. That's why they haven't been affected by 10-20% tariffs.
As for stock price and market cap, why does it matter? There are several people here who have invested heavily AAPL and every time the stock goes down the is much wailing and gnashing of teeth. Does that affect how your iPhone or MacBook work?
I also agree that this obsession with high hardware prices seems to find any excuse to rage on, even if there’s no real correlation with that and stock price. My stock purchases won’t be based on this short term dip.
Edit: I meant that my stock sales won’t be affected by this downturn. I may actually buy some if, after running the numbers, it makes sense.