Apple downgraded at KeyBanc on valuation, potentially slow US sales
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KeyBanc downgraded Apple (NASDAQ:AAPL) to Sector Weight from Overweight noting a stretched valuation and expectations for U.S. sales to struggle.
The analysts said that they downgraded the stock based on valuation, as Apple is trading near all-time-high multiples and a large premium to the Nasdaq compared to history.
U.S. sales are likely to struggle based on the analysts' view of U.S. upgrade rates, and initial U.S. iPhone promotions from U.S. carriers being restrictive.
About 37% of the tech giant's revenue comes from the U.S., making it the company's largest geographic segment. The analysts anticipate U.S. to see its fourth consecutive year-over-decline in Q4'23, potentially going into Q1'24 for several reasons.
In addition, International growth expectations for reacceleration could be aggressive, according to the analysts.
They added that estimates seem to be full from top and bottom line perspectives. The analysts said they expect [fiscal 2024] revenue growth of 3.5% versus consensus of [greater than] 6% where they have a more subdued view on revenue across all of Apple's revenue segments. They also anticipate margins to improve at a slower pace in the next couple of years.
The analysts noted that user growth is still more vital than unit growth, however, they think this could be a losing argument in the near-term given the lack of catalysts, which they believe leads to a neutral risk/reward.
Apple has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Seeking Alpha authors' average rating is also Hold. Meanwhile, the average Wall Street analysts' rating is more positive with a Buy.
AAPL -1.29% to $170.18 premarket Oct. 4

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