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Apple stock has surged 41% this year.
Spencer Platt/Getty Images
Apple
has been heading toward a record valuation this month, but that didn’t stop UBS from downgrading the stock.
UBS analyst David Vogt wrote Monday that he is concerned about a possible slowdown in iPhone sales and services revenue. He downgraded shares of
Apple
(ticker: AAPL) to Neutral from Buy, but increased his price target to $190 from $180. The ratings and target change came the same day
Apple
stock hit a new closing high of $183.79.
If Apple hits $190.734 a share, the company will notch a historic $3 trillion market value. The stock has surged 41% this year.
Shares were down 0.4% Tuesday to $182.51, while the
S&P 500
was up 0.6%
UBS recently conducted research that indicated plans to purchase iPhones over the next 12 months is “stable to slightly down” compared with data from six months ago, Vogt wrote.
iPhone sales are crucial to the tech giant. Smartphone sales made up $51.3 billion of the company’s total $94.8 billion in revenue in its latest quarter, easiest the largest contributor to Apple’s top line.
But with inflation still elevated and an uncertain economic environment, a decline in iPhone poses a risk to Apple’s revenue.
“Tough comps, macro headwinds, and slowing growth in the iPhone installed base will result in a material deceleration in Services revenue growth in FY23 and FY24,” the analysts wrote. Services revenue includes sales from the App Store and Apple Music.
“We expect AppleTV+, Music, and AppleCare growth to slow following strong Covid-driven growth in prior years and slowing growth in the installed base of iPhones following a decline in unit sales during FY23,” Vogt added.
Apple didn’t immediately respond to a request for comment.
The stock’s lofty valuation also factored into Vogt’s downgrade. Apple trades at 28.6 times forward earnings, notably above the stock’s historic average of 22.7 times. Vogt says this valuation is too rich, and it prices in products that haven’t become available for purchase yet—including the Vision Pro, a mixed-reality headset that turns a room into a virtual space filled with apps the user can control with their hands, voice, and eyes.
“We do not expect [new products] to be a material revenue and profit contributor over the next several years,” he said.
Write to Angela Palumbo at [email protected]
Source: https://www.barrons.com/articles/apple-stock-price-iphone-downgrade-de61a5e2?siteid=yhoof2&yptr=yahoo