16 Aug

Gauging Analysts’ Sentiment for Apple Stock

WRITTEN BY Sharon Bailey

Apple (AAPL) stock has been quite volatile over the past few days. This month, the tech giant’s stock has fallen 5.3%, dragged down by US-China trade tensions’ potential impact on key Apple products. Retaliation by China caused panic in US markets and dragged down Apple stock by 1.5% in the week ended August 9.

However, Apple stock rose 4.0% on August 13. This rise was triggered by the US Trade Representative’s update on 10% tariffs on certain Chinese imports being delayed from September 1 to December 15. The tariffed items are to include cell phones, laptops, footwear, and clothing. However, the temporary relief on tariffs doesn’t apply to Apple Watches, HomePods, or AirPods. As of yesterday, Apple stock had risen 27.9% year-to-date. Meanwhile, the S&P 500, Dow Jones, and Nasdaq Composite had risen 13.6%, 9.7%, and 17.1%, respectively.

Analysts’ opinions on Apple

Yesterday, Wedbush analyst Daniel Ives expressed optimism about the tech giant. Despite the trade war, Ives expects stable demand for the iPhone. He forecasts Apple to sell 180 million–185 million units in fiscal 2020. Wedbush rates Apple as “outperform” and has set its price target at $245.

Apple could absorb the higher costs resulting from the 10% tariff. Alternatively, it could pass them on to customers through product prices. According to CNBC, JPMorgan analysts believe the tech giant may absorb the tariffs’ impact and not raise iPhone prices, to prioritize its market share. The analysts estimated Apple’s iPhone margins would contract by about 300 basis points if it were to absorb the higher costs. JPMorgan Chase has rated Apple stock as “overweight.”

Bank of America analysts estimate tariffs would impact Apple’s EPS by $0.50–$0.75. They believe this impact is manageable. However, analysts at Cowen believe the tariffs would impact Apple’s hardware product profitability significantly. Both Bank of America and Cowen have rated Apple stock as “buy.”

Analysts’ ratings and price target for Apple stock

Several analysts increased their price target for Apple stock after the company released its fiscal 2019 third-quarter results on July 30. Revenue from iPhones continued to decline in the quarter. However, the company’s overall revenue rose 1.0%, driven by wearables and services.

While the non-iPhone revenue’s growth is encouraging, iPhone revenue’s double-digit percentage decline worries investors. In fiscal 2019’s third quarter, iPhone revenue fell 11.8%. It fell 15% and 17% in the first and second quarters.

Customers are eagerly awaiting Apple’s iPhone 11 launch, expected in September. The iPhone 11 is rumored to support the Apple Pencil and three cameras. Rival Samsung (SSNLF) launched its premium smartphones, the Galaxy Note 10, Note 10+, and Note 10+ 5G, at the Samsung Unpacked event on August 7. According to a Counterpoint, Apple was the global leader in the premium smartphone market in the first quarter. It held 47% of the market, while Samsung placed second with 25%.

On July 8, Rosenblatt Securities downgraded Apple stock to “sell” from “neutral.” Since Apple’s third-quarter results, analysts’ ratings for the stock haven’t changed significantly. Of the 44 analysts covering the stock, 23 recommend “buy,” 18 recommend “hold,” and three recommend “sell.” Their average 12-month price target of $223.03 for Apple stock implies an upside of about 11%. The US-China trade war and looming recession fears are likely to impact Apple stock and broader markets.

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