Piper Jaffray cuts Apple price forecast on international ‘weakness’

Yet another Wall Street analyst has cut share price expectations for Apple as Piper Jaffray joined the growing chorus of brokerages to readjust iPhone expectations.

“While we are not seeing evidence of iPhone unit weakness in our domestic iPhone user survey, reduced expectations from multiple component suppliers are likely a sign that global unit uptake has not met expectations,” analyst Michael Olson said in a note to clients Thursday. “Based on this, and despite what appears to be a solid domestic uptake of iPhone XR, XS and XS Max, we are slightly lowering our iPhone estimates in fiscal 2019 and 2020.”

Olson maintained his overweight rating on Apple stock, but trimmed his 12-month price target to $222 from $250. The 11 percent reduction to his price target implies 31 percent upside over the next year. The analyst sees much of the decline in international sales already priced into shares and believes Apple’s fiscal 2019 earnings will reach $13.45 per share.

“Data points from various component suppliers suggest iPhone units are tracking below plan, but our domestic survey of over 550 iPhone owners shows similar upgrade rates versus our 2017 survey,” Olson said. “Specifically, 49 percent of iPhone owners said they will (or already have) or may upgrade to one of the new iPhone models this year, which was up slightly from 48 percent last year.”

Piper Jaffary believes that 39 percent of iPhones sold this year will be iPhone XS and XS Max, while 30 percent will be the iPhone XR.

Piper Jaffray joins a number of firms lowering expectations for Apple’s stock recently. Goldman Sachs (on the lackluster international reception of the iPhone XR), Guggenheim Partners (on declining iPhone unit sales next year), UBS (on warnings from suppliers and weak overseas sales), HSBC (on over-dependence of a single product) and Rosenblatt Securites (on a lowered iPhone shipment estimates).

Morgan Stanley slashed its price target on Apple to $236 a share from $253 a share on Friday, citing a weak market in China for iPhones because people are taking increasingly more time to replace their old phones.

Despite the cut to Piper Jaffray’s price target, shares of Apple rose 1 percent Thursday, a welcome change of pace for current Apple shareholders; the stock is down more than 24 percent over the last three months.

Though Apple reported earnings for its fiscal fourth quarter on Nov. 1 that beat estimates on the top and bottom lines, the company’s decision to withhold iPhone unit sales from future financial reports rattled analysts and shareholders alike. Many use iPhone unit sales as an quick proxy for the overall health of the company and interpreted Apple’s choice as evidence that iPhone sales growth is likely to slow.

Apple has lost $252.08 billion in market cap since reporting earnings, a loss larger than the entire value of Verizon or Procter & Gamble.

CEO Tim Cook has stressed the importance of the company’s services business as the company’s next area of growth. The segment generated nearly $10 billion in revenue in the fourth quarter.

“When we look at our services business, we think about the fact that we have a very large and growing installed base,” Cook said on the company’s earnings call. “The installed base of all our major product categories is at an all-time high and has been growing over the last several quarters, so the opportunity for us to monetize our services business continues to grow over time.”

— CNBC’s
Michael Sheetz
contributed reporting.

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