Apple Slips From Record High As UBS Cuts Rating On Softer iPhone Demand
Apple may have a problem with iPhone demand, UBS analysts say.
Updated at 7:08 am EDT
Apple (AAPL) - Get Free Report moved lower Tuesday after analysts at UBS lowered their rating on the tech giant while citing softness in iPhone demand.
UBS analyst David Vogt lowered his rating on Apple to 'neutral' from 'buy", but added $10 to his price target to $190 per share, noting "persistent softness in developed markets and data that indicates growth is likely to remain under pressure".
Vogt said Apple stock, which closed at an all-time high last night and trade at around 29x earnings, remain expensive compared to the broader market, and more so when iPhone unit growth is likely to slow between 1% and 2% over the back half of the year.
Vogt pointed to weakness in a UBS Evidence Lab survey that showed '12-month iPhone forward purchase intent' down from levels seen at the end of last year, with outsized declines in the U.K., China and Japan. Advances in other markets, Vogt said, may not be big enough to "drive long-term sustainable iPhone growth above mid-single digits".
Apple shares, which closed at a record high of $183.79 last night, were marked 0.9% lower in pre-market trading to indicate an opening bell price of $182.16 each, a move that would still leave the stock up more than 40% for the year.
Better-than-expected iPhones sales of $51.33 billion powered overall group revenues for Apple over the three months ending in March, the group's fiscal second quarter, but its top line still slipped 2.5% to $94.84 billion.
That marked the second consecutive sequential decline, a rate CFO Luca Maestri said would likely carry over into the June quarter
“The iPhone is truly a global product and we’re doing well in emerging markets right now,” Maestri told investors on a conference call in April. “That has helped us offset some macroeconomic challenges.”
Revenue from Apple's key services business -- which includes Apple Pay, iCloud and Apple TV --- rose 5.5% to $20.91 billion.
Hardware sales, as expected were soft: Mac sales fell 31% from last year to $7.17 billion, Apple said, although iPad sales were down 13% to $6.67 billion. Wearables sales, which includes the AppleWatch, slipped 0.6% to $8.76 billion.
Apple's recent push into India, which includes the opening of its first retail stores in the Android-dominated market earlier this year, resulted in record March quarter revenue, estimated at $6 billion.
Markets in Mexico, Indonesia and the Philippines all tallied record high sales figures as Apple's installed base of devices topped 2 billion worldwide.
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