Citi reduces AAPL target to $200, because 'trade wars are bad for tech stocks'

Posted:
in AAPL Investors edited December 2018
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
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.
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Comments

  • Reply 1 of 26
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    elijahg
  • Reply 2 of 26
    The BBC is calling it a trade war as well. If it’s good enough for the BBC, it’s good enough for me.
    edited December 2018
  • Reply 3 of 26
    MacProMacPro Posts: 17,905member
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    I am not cheap when it comes to buying Apple gear but I had to put the brakes on yesterday.  I have the 7 Plus and love it but 32 GB is less than ideal now I use it as an iPod for my Car Play and I obviously have a limit on the number of albums I can load in.  I was in our Mall for a wander around with my wife yesterday and surprisingly (cough cough),  I found myself in the Apple Store and asked to see the 64 GB XR.  The chap there looked at my iPhone and looked it up and said it was a  $250 trade-in in excellent condition.  In the end, I realized I love the 7 Plus but as a keen photographer, I have my Sony a7 iii and Canons so it's not about the cameras in iPhones for me and dang, I was really looking for an extra 32 GB for music and it was going to cost me $499.  I decided I'll just swap out the albums more often on the 7 Plus!  
    edited December 2018 muthuk_vanalingambeowulfschmidtelijahg
  • Reply 4 of 26
    brucemcbrucemc Posts: 1,499member
    Apple is a bad investment.  Please sell your shares.
    pscooter63
  • Reply 5 of 26
    The BBC is calling it a trade war as well. If it’s good enough for the BBC, it’s good enough for me.
    What's going on is the kind of thing, among other kinds of things, which has traditionally been referred to as a trade war.

    Whether or not we think it's prudent policy, it's fair to call it a trade war.
    elijahg
  • Reply 6 of 26
    Microsoft, and now Amazon have a higher market cap than Apple. Soon Alphabet/Google will too. Apple stock is down 25% in the last three months and 2.3% for the year.


  • Reply 7 of 26
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    It actually ranges from $1099-$1449 or $54-$68 per month. The iPhone 7 is a good phone and will last quite a while but so will the XS max. Given a 5 year life the lower cost version of the iPhone would cost around $18/month. 
    StrangeDaysmac_dog
  • Reply 8 of 26

    brucemc said:
    Apple is a bad investment.  Please sell your shares.
    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. 
    edited December 2018 analyst52yojimbo007radarthekat
  • Reply 9 of 26
    MacPro said:
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    I am not cheap when it comes to buying Apple gear but I had to put the brakes on yesterday.  I have the 7 Plus and love it but 32 GB is less than ideal now I use it as an iPod for my Car Play and I obviously have a limit on the number of albums I can load in.  I was in our Mall for a wander around with my wife yesterday and surprisingly (cough cough),  I found myself in the Apple Store and asked to see the 64 GB XR.  The chap there looked at my iPhone and looked it up and said it was a  $250 trade-in in excellent condition.  In the end, I realized I love the 7 Plus but as a keen photographer, I have my Sony a7 iii and Canons so it's not about the cameras in iPhones for me and dang, I was really looking for an extra 32 GB for music and it was going to cost me $499.  I decided I'll just swap out the albums more often on the 7 Plus!  
    You will always get more selling Apple gear back on the market than trading in at the store. 
    elijahg
  • Reply 10 of 26

    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    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?
    edited December 2018 king editor the grateelijahgradarthekat
  • Reply 11 of 26
    Microsoft, and now Amazon have a higher market cap than Apple. Soon Alphabet/Google will too. Apple stock is down 25% in the last three months and 2.3% for the year.


    And? What are you trying to suggest, that Apple products are somehow shittier now than they were just a short while ago when they had the largest market cap in history? Did they magically transform?

    More pointless pearl clutching. Yawn. 
    analyst52pscooter63elijahgradarthekat
  • Reply 12 of 26
    rob53rob53 Posts: 1,976member
    "Trade wars are bad for tech stocks," This says it all. It has nothing to do with Apple products or even their cost but everything to do with the reckless application of tariffs. Someone is making money on the drop of AAPL stock (actually lots of people) as well as on every company tariffs are applied to. 

    "
    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. 
  • Reply 13 of 26
    MplsPMplsP Posts: 1,010member
    kruegdude said:
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    It actually ranges from $1099-$1449 or $54-$68 per month. The iPhone 7 is a good phone and will last quite a while but so will the XS max. Given a 5 year life the lower cost version of the iPhone would cost around $18/month. 
    I'm in the same boat. I'd like to upgrade my 6s for a Xs or Xr to get a better camera, but $1250 is a big pill to swallow. Yes, you can do like the credit card companies do and break it up into monthly payments so the number looks low, but it doesn't change the amount that you're paying. iPhones last longer than others, but 5 years is being over generous, IMO. 3-4 is a more reasonable expectation.

    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?
    atomic101
  • Reply 14 of 26
    brucemcbrucemc Posts: 1,499member
    kruegdude said:

    brucemc said:
    Apple is a bad investment.  Please sell your shares.
    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. 
    If you don't sell your shares, how can I buy them?  Please sell your shares.
    tmayddawson100pscooter63radarthekat
  • Reply 15 of 26
    rob53 said:
    "Trade wars are bad for tech stocks," This says it all. It has nothing to do with Apple products or even their cost but everything to do with the reckless application of tariffs. Someone is making money on the drop of AAPL stock (actually lots of people) as well as on every company tariffs are applied to. 

    "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. 
    I thought Apple products were excluded from tariffs?
    edited December 2018
  • Reply 16 of 26
    lkrupplkrupp Posts: 6,621member
    Microsoft, and now Amazon have a higher market cap than Apple. Soon Alphabet/Google will too. Apple stock is down 25% in the last three months and 2.3% for the year.


    Waiting for you to resurrect Michael Dell’s retort about Apple those many years ago. Come on, you can do it, hater.
    edited December 2018 tmaypscooter63elijahg
  • Reply 17 of 26
    MplsPMplsP Posts: 1,010member
    rob53 said:
    "Trade wars are bad for tech stocks," This says it all. It has nothing to do with Apple products or even their cost but everything to do with the reckless application of tariffs. Someone is making money on the drop of AAPL stock (actually lots of people) as well as on every company tariffs are applied to. 

    "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. 
    I thought Apple products were excluded from tariffs?
    Last I heard they were going to be included. I think Trump just bought a new iPhone so he's not worried about the price. 
  • Reply 18 of 26
    brucemc said:
    kruegdude said:

    brucemc said:
    Apple is a bad investment.  Please sell your shares.
    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. 
    If you don't sell your shares, how can I buy them?  Please sell your shares.
    Lol, there’s always someone out there buying high and selling low for your needs. Not usually me :-)
  • Reply 19 of 26
    MplsP said:
    kruegdude said:
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    It actually ranges from $1099-$1449 or $54-$68 per month. The iPhone 7 is a good phone and will last quite a while but so will the XS max. Given a 5 year life the lower cost version of the iPhone would cost around $18/month. 
    I'm in the same boat. I'd like to upgrade my 6s for a Xs or Xr to get a better camera, but $1250 is a big pill to swallow. Yes, you can do like the credit card companies do and break it up into monthly payments so the number looks low, but it doesn't change the amount that you're paying. iPhones last longer than others, but 5 years is being over generous, IMO. 3-4 is a more reasonable expectation.

    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 pretty much agree with you on all of that personally but for some that can’t take the budget hit the 5 year mark is another way of justifying an upgrade. 

    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.
    edited December 2018
  • Reply 20 of 26
    MplsP said:
    kruegdude said:
    iPhone XS Max is $1,449.00 now. I wonder how high the price will go now. Meh. I'm fine with my iPhone 7.
    It actually ranges from $1099-$1449 or $54-$68 per month. The iPhone 7 is a good phone and will last quite a while but so will the XS max. Given a 5 year life the lower cost version of the iPhone would cost around $18/month. 
    I'm in the same boat. I'd like to upgrade my 6s for a Xs or Xr to get a better camera, but $1250 is a big pill to swallow. Yes, you can do like the credit card companies do and break it up into monthly payments so the number looks low, but it doesn't change the amount that you're paying. iPhones last longer than others, but 5 years is being over generous, IMO. 3-4 is a more reasonable expectation.

    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?
    If stock price and market cap don’t matter why does AI post stories every time some Wall Street analyst changes their price target or issues a research note?
    elijahg
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