Through no Fault of Their Own, Apple Inc. (AAPL) Loses ‘Top Pick’ From Barclays

Apple stock

Apple Inc. shares received an overweight rating from Barclays, who also removed it its ‘top pick’ designation, citing fading smartphone industry trends. Analyst Mark Moskowitz started covering Apple’s stock from October 15, 2015, and until today, the stock had held a Top Pick designation.

Concerns over global smartphone growth

Moskowitz – in a note to clients on Thursday – wrote, “While we maintain a constructive view on the long-term Apple franchise value and think next year ushers in IP8 with revolutionary advancements, the stock could be overbought given how fundamentals may not be as strong.”

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Moskowitz said that the research his firm conducted indicate that a recovery in the global smartphone growth could be pushed out. Also, the iPhone sales trends could be at risk of “petering out” in the coming months just like last year’s post-iPhone 6S launch fall-out, the analyst said citing conversations with the industry participants.

One of his concerns is for the smartphone industry as a whole, and is not limited to Apple. Analyst at Barclays lowered their smartphone revenue and unit growth forecasts, and now are expecting a 2.9% decline in revenue and 2.6% increase in units. Their previous expectations were that the global smartphone revenue would decline by 0.7%, while global units would rise by 3.7%.

Problems with the Apple supply chain

Moskowitz said that both Apple and Samsung released new devices recently, but they failed to result in any significant improvements beyond the initial channel fill for those launches. Talks with Apple’s supply chain, only increases their concern. The analyst notes that the suppliers are cautious, and there are chances that this year end could meet a similar fate as of last year, resulting in a sharp drop-off in smartphone builds.

However, some of his comments are in contradiction to the news heard from Apple’s supply chain in Taiwan. DigiTimes recently reported that Apple raised the component orders for the iPhone 7 lineup. A hike of 20% to 30% is expected in the orders for the iPhone 7 touch panels than the previous expectations for the Q4 this year. For clarifying the things, the website said that both TPK Holding and General Interface Solution are making touch panels for this year’s iPhone, but it seems, Apple has ordered more panels from GIS since the initial report.

Variety is seen in coverage on Apple Inc. and the iPhone 7 almost every day. The reason for it is that some analysts are convinced that a rebound in units is underway while others do not see it. Moskowitz trimmed his price target by $1 to $114 per share. His bull case for Apple stock is at $138 per share while his bear case is at $91 at present.

At 10.03 am EDT, Apple shares were up 0.56% at $112.82. Year to date, the stock is up over 5% while in the last one-year, it is up over 2%.

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    Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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