Apple’s Price Target Cut at RBC on iPhone Demand Woes

(Bloomberg) -- Apple Inc.’s price target was trimmed by RBC Capital Markets on Tuesday, the latest investment bank to cite concerns about weak demand for the company’s iPhone line, a factor that has pushed the technology bellwether into bear-market territory over the past several weeks.

“Given sustained data points around soft iPhone demand from supply-chain and others, we think it’s prudent to adjust estimates lower especially as it relates to March-quarter and beyond,” analyst Amit Daryanani wrote to clients. While the stock has already seen pronounced weakness on this issue, “we think investors will wait for data-points/noise level to stabilize before getting more positive on the name,” something Daryanani expects will happen in early 2019.

Daryanani cut his price target to $235 from $240, compared with the average of $228 as compiled by Bloomberg, and also trimmed his 2019 estimates on the Dow component. Yet RBC affirmed its outperform rating on Apple, saying it remains a “core large-cap tech holding” in an “increasingly ‘risk-off’ environment,” given the company’s strong balance sheet and “aggressive” buyback program.

Apple’s Price Target Cut at RBC on iPhone Demand Woes

The stock dropped 2.1 percent before the bell, a decline that implied its market capitalization would open below that of Microsoft Corp. While Apple inched below that threshold Monday afternoon, it still closed as the most valuable public company. Should it stay below Microsoft through Tuesday’s close, it would mark the first time since 2013 that Apple has not had the largest stock on the market.

Part of the pre-market weakness came after President Donald Trump late Monday suggested in comments to the Wall Street Journal that 10 percent tariffs could be placed on mobile phones and laptops made in China, which would be another blow for Chief Executive Officer Tim Cook.

“While we ultimately believe this is all part of a broader negotiation with China as talks heat up over the next week, now Cook and Apple find themselves squarely at the center of the tariff talks which were previously background noise as investors try to gauge what a potential 10 percent tariff on iPhones and other products would do to demand and unit growth over the next 6 to 12 months if ultimately imposed,” Wedbush analyst Daniel Ives wrote to clients.

Ives, who rates the stock outperform, added that “the Street will not be taking this news lightly,” and that it “will surely add to this white knuckle period for Apple.”

©2018 Bloomberg L.P.