Apple stock is likely to struggle amid lower iPhone upgrade rates and a lack of near-term catalysts, a Wall Street analyst says.
KeyBanc Capital Markets analyst Brandon Nispel on Wednesday downgraded Apple stock to sector weight, or neutral, from overweight, or buy.
In a note to clients, Nispel said Apple's valuation has become stretched vs. the Nasdaq when compared with historical rates. Apple is "trading near peak multiples despite a mature growth profile," he said.
Apple needs to reaccelerate its sales growth to justify its current earnings and free-cash-flow multiples to enterprise value, he said. On a year-over-year basis, Apple's sales have fallen for three straight quarters.
Also, the Cupertino, Calif.-based company might not get much of a boost from the recently launched iPhone 15 series handsets either, he said. Apple is facing lower upgrade rates as consumers hold on to their smartphones for longer periods, Nispel said. In the U.S., wireless carriers are being less promotional when it comes to the new handsets, he said.
Apple Stock Needs A New Catalyst
For now, Apple stock lacks catalysts that could drive it higher, Nispel said.
"We're looking for fiscal 2024 revenue growth of 3.5% vs. consensus of more than 6%," Nispel said. "We have a more muted view on revenue across all of Apple's revenue segments. We also expect margins to improve at a slower pace in the next couple of years."
Nispel set a fair value of Apple stock at 182. On the stock market today, Apple stock advanced 0.7% to close at 173.66.
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