Apple Gets a Downgrade and a New Street-High Target on the Same Day

Updated on
  • Longbow cuts to neutral while BofAML hikes target to $220
  • Analysts debate iPhone cycle after shares gained 46% last year

Apple Downgraded to Neutral at Longbow Research

Apple Inc. stock analysts headed in opposite directions, with the tech giant picking up a rare downgrade on the same day it got a new target price that exceeded all others on Wall Street.

While Longbow Research analyst Shawn Harrison cut the stock to neutral on Wednesday, Bank of America Merrill Lynch analyst Wamsi Mohan raised his target price to $220 from $180. That’s the highest among analysts surveyed by Bloomberg. The shares fell 0.3 percent to $175.74 at 10:50 a.m. in New York.

Longbow Research analyst Shawn Harrison discusses his call on Apple with Bloomberg’s Jonathan Ferro.

(Source: Bloomberg)

In a note, Harrison cited relatively tame demand for the iPhone, predicting shipments would grow less than 10 percent this year versus a consensus forecast of 11 percent.

“A declining iPhone unit environment versus consensus expectations should be a greater overarching theme near-term” than positives touted by Bank of America, such as services growth and tax repatriation, Harrison said in an interview with Bloomberg TV. The analyst added in his note that this tempered iPhone growth outlook should limit stock appreciation.

Mohan, meanwhile, sees more gains for the stock after a 46 percent jump last year.

“In 2018, we remain bullish on potential for cash repatriation, lower tax rates, and the potential for positive estimate revisions heading into 2019,” the analyst wrote in a note.

Apple downgrades have been fairly rare recently. Before Longbow’s cut Wednesday, a downgrade by Nomura Instinet -- which lowered its rating to neutral in December -- marked the first such move since June, according to data compiled by Bloomberg. Analysts are still overwhelmingly positive, with 34 firms rating it a buy, 10 advising hold and no sell recommendations.

Apple’s fiscal first-quarter results, scheduled for Feb. 1, may provide clues as to the health of iPhone demand, particularly in the crucial Chinese market.

— With assistance by James Cone, and Arie Shapira

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