Apple Tightens Its Belt as Analyst Cites a Decline in Services Growth

(Bloomberg) -- Distress for Apple Inc. continues to mount, and soft demand for new iPhones is only one of its troubles.

Apple will see the growth rate of its Services division decelerate come fiscal 2019, Macquarie analyst Benjamin Schachter said in a research note. The firm slashed Apple’s price target to $188 per share from $222 although it still rates the stock outperform.

App Store, Licensing, and Apple Care are the segment’s top three drivers, and Schachter anticipates these areas “will slow in the coming quarters as tough comps and other issues impact growth rates.” And unfortunately, the faster-growing business from Music, iCloud and Apple Pay aren’t large enough to offset the downturn, he said.

Following Tuesday’s decline, shares of Apple have rebounded 1.3 percent in early trading.

Apple Tightens Its Belt as Analyst Cites a Decline in Services Growth

Soft consumer demand for Apple’s latest devices still remains the biggest thorn in Apple’s side. And the downturn may now be spreading to other areas.

Recent checks “indicate that the iPhone woes have begun to affect company finances deep enough” for Apple to trim non-core projects, according to Lynx Equity analyst KC Rajkumar and Jahanara Nissar.

Lynx says weakness in iPhone sales is prompting a level of belt tightening. And this is “perhaps the first time in years that Apple is having to resort to a measure of pulling in of non-core development activity in response to weakness in core operations.”

©2018 Bloomberg L.P.