Bank of America changed its rating on Apple from “buy” to “neutral,” which caused the company’s shares to drop by almost 5% on Thursday. The investment bank also cut its price goal by about 14%, from $185 per share to $160 per share.
Analysts led by Wamsi Mohan said in a research note that the slowdown in services and the lacklustre iPhone lead times are signs that people will spend less. The price of the shares dropped as much as 4.9%, to $142.48, which was the lowest price since mid-July.
The stock was about to go down for the second day in a row. Wednesday’s drop was caused by a report from Bloomberg that Apple had scrapped plans to make more of its new iPhone 14 this year because an expected demand surge hadn’t happened.
By Wednesday’s session, Apple shares had dropped about 16% since the beginning of the year. BofA said that compared to the 29% drop in the S&P 500 Information Technology sector, the shares have been seen as a relatively safe haven.
BofA said that a weaker iPhone 14 cycle, which could mean less spending by consumers, a weaker near-term services trajectory in which App Store and licensing payments from Google could slow down, and pressure from a stronger dollar are all risks to this outperformance over the next year.
Mohan wrote, “Apple’s long-term prospects are still good, but we see more risk to earnings and valuation in the near future.” The bank thought it would earn $5.87 per share in the fiscal year 2023 and bring in $379 billion in revenue. This was much less than the average estimate of $6.46 per share and $412 billion, respectively.
It said that positive risks to its downgraded ratings include stronger sales of Pro iPhones, which can make up for weaker sales of regular iPhones, and new services, such as advertising, which can more than make up for a slowdown in other areas.
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