Goldman Sachs sees Apple stock stagnant for a year, slashes estimate
After only restarting coverage on Apple stock in early 2018, Goldman Sachs has cut its stock price forecast dramatically, because of perceived lack of demand for the iPhone XR, and lack of enthusiasm for Apple products in China.
Tim cook with Jony Ive at the iPhone XR rollout
"In addition to weakness in demand for Apple's products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received," Rod Hall wrote in a note to investors seen by AppleInsider. "Our estimates remain at the lower end of Apple's guidance range at this point as we believe the company likely included this more negative scenario in its provided range."
Hall also cited "severe Chinese demand weakness in late Summer and a stronger U.S. dollar" for reasoning behind the firm's latest prognostications.
Hall had little else to say in the note, other than cutting the price target for the stock to $182, down from the previous estimate of $209. Before market opening on Tuesday, Apple stock is valued at $181.93, hit nearly 20 percent of its value since the earnings report. In September, Goldman Sachs had a price target of $240 that the firm raised because it badly missed guesses at iPhone X sales volumes.
It isn't clear where Hall is getting his data, however. The iPhone XR has been available for a month, and Apple hasn't released any sales figures.
In all likelihood, Hall is drawing from lower-than-expected component orders made by Apple previously cited as signs of weakness in the iPhone market several times by other analysts in the last month. Historically, those data points have ultimately resulted in little real-world effect as demonstrated by Apple's actual results.
In the last quarter's financial earnings report, Apple forecast a wider revenue range than normal between $89 billion and $93 billion, twice as wide as usual. Should Apple hit even the $89 billion low-end target, it will be the company's largest holiday quarter in history.
Apple's decision to stop providing unit sales figures appears to be shaking analysts, as it will make forecasting seasonal sales much harder to predict. There has also been a warning from CEO Tim Cook to anticipate a softer forecast than analysts would usually expect, partly caused through the relatively late introduction of the iPhone XR and foreign exchange rate issues.
Cook has also previously suggested that relying on supply chain metrics to predict iPhone demand is folly. "I've never seen one that's even close to accurate," the executive said in 2015 regarding supply chain estimates, with variations on the same theme since.
Tim cook with Jony Ive at the iPhone XR rollout
"In addition to weakness in demand for Apple's products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received," Rod Hall wrote in a note to investors seen by AppleInsider. "Our estimates remain at the lower end of Apple's guidance range at this point as we believe the company likely included this more negative scenario in its provided range."
Hall also cited "severe Chinese demand weakness in late Summer and a stronger U.S. dollar" for reasoning behind the firm's latest prognostications.
Hall had little else to say in the note, other than cutting the price target for the stock to $182, down from the previous estimate of $209. Before market opening on Tuesday, Apple stock is valued at $181.93, hit nearly 20 percent of its value since the earnings report. In September, Goldman Sachs had a price target of $240 that the firm raised because it badly missed guesses at iPhone X sales volumes.
It isn't clear where Hall is getting his data, however. The iPhone XR has been available for a month, and Apple hasn't released any sales figures.
In all likelihood, Hall is drawing from lower-than-expected component orders made by Apple previously cited as signs of weakness in the iPhone market several times by other analysts in the last month. Historically, those data points have ultimately resulted in little real-world effect as demonstrated by Apple's actual results.
In the last quarter's financial earnings report, Apple forecast a wider revenue range than normal between $89 billion and $93 billion, twice as wide as usual. Should Apple hit even the $89 billion low-end target, it will be the company's largest holiday quarter in history.
Apple's decision to stop providing unit sales figures appears to be shaking analysts, as it will make forecasting seasonal sales much harder to predict. There has also been a warning from CEO Tim Cook to anticipate a softer forecast than analysts would usually expect, partly caused through the relatively late introduction of the iPhone XR and foreign exchange rate issues.
Cook has also previously suggested that relying on supply chain metrics to predict iPhone demand is folly. "I've never seen one that's even close to accurate," the executive said in 2015 regarding supply chain estimates, with variations on the same theme since.
Comments
Apple stock goes up… analysts raise estimates.
What exactly do they offer if they're just going to react after the fact?
Market share from who? Certainly not Apple.
It is likely that the decline of Apple share represent two factors occurring simultaneously.
First, many articles have reported that suppliers have cut back on the parts they are delivering. As pointed out by Tim Cook and others, these are not reliable indicators of iPhone sales for many reasons. First, there will always be cutbacks. After all, companies order parts for manifacturing and companies reduce those orders when their planned manufacturing run has been fulfilled. Nobody knows, least of all stock analysts, whether these cutbacks mean a reduction in the number of units that are being sold. People should also remember that many manufacturers are using some of these component manufacturers and cutbacks could also represent the general decline in smartphone sales.
Second, the entire stock market is falling. Previously high flying stocks such as Amazon and Facebook have lost 25% or more of their value. Stock fund managers are rushing to take their profits before the market drips further. In my opinion, falls of Amazon and Facebook are warranted because Amazon is extremely overvalued and Facebook is having serious problems with protecting their user data. On the other hand, no bad news has emerged since its spectacular Q4’18 earnings report. In fact, Apple news has been very positive. Apple’s China business is looking up, the first cooperative agreement between China and the U.S. was announced suggest s beginning to the end of the trade war. Reviews of the iPhone XR, iPad Pros, and MacBook Air have been glowingly positive.
Analysts appear to be ignoring to striking new developments: Apple has opened up its own online store refurbished Apple products and many large retailers (Walmart, Bestbuy, Target, Costco) are selling iPhone 6, 6s, 7, X, and 8 for very low prices. The fact that Apple has started selling its own refurbished products tells you that this market has grown large enough for Apple to try to take a cut. Older models of Apple iPhones will be taking market share away from cheaper Androids. Which one would you rather have, an iPhone X or any Samsung or Huawei smartphone for the same price? Apple has found a way to grab market share from Android makers. By leapfrogging all the other smartphone makers in terms of technology, Apple now can offer year old or even two year old technology for the same or lower price as their competitors. I think that Q1’19 sales will pleasantly surprise many people, even diehard Apple fans. Goldman Sachs will be kicking itself for giving its customers bad advice.
I would attribute most most of the drop to general market concern and just taking profits. I had scheduled a sale for January for tax reasons myself, need to re-think my plan personally.
That said, a part of me thinks we will see $160 before we see $210 again. Hope Apple is "backing up the truck" on the drop though.
This is happens every single quarter, and folk still don’t get it. The perceived lack of demand is because analysts don’t understand the supply chain (not just Apple’s– they don’t get how supply chain works in general).
Apple is fine. Competition is fine. Intellectual Property theft is a problem (true) but that’s not on Google.
This administration has taken the M15 “spray and prey” approach to dealing with China (AKA “USA vs China: Trade War”).
The stock market bubble has been driven by government spending. The trajectory of national debt (for almost 20 years and multiple administrations) looks like a space rocket launch. One of the biggest holders of that debt is China. (US Total Debt currently 21 trillion +)
We’re looking at the two trains on the same track, barreling towards each other... it’s no surprise the stock markets of both countries are going ‘ape shit’.
That said, “traders” make money with the stock mark going up or down, it’s only the little guys that get @#$&’d and that’s only if they panic. The market movers (hedge funds) love panic, so they slam the panic button (using analysts) whenever they can.
Apple will weather the downturn without a problem, and probably use the opportunity to buy back stock. Apple has released their best product lineup ever, sales may or may not experience a hiccup on China but it’s a short term concern.
If you want to worry about something, worry about the national debt. Traditionally it’s been the Republican Party that’s tried to reign things in (and be responsible) but they’ve realize increasing military spending gets votes.
When debt becomes greater than GDP risks to growth skyrocket. We’re closing on that moment scary fast...