Apple Inc. fell 4.5% after suffering a rare downgrade as Bank of America warned of weaker consumer demand for its popular smartphones and laptops.
(Bloomberg) — Apple Inc.
fell 4.5% after suffering a rare downgrade as Bank of America warned of weaker consumer demand for its popular smartphones and laptops.
The world’s most valuable company has proved a haven for investors this year, outperforming fellow mega-caps and the wider tech gauge amid a steep selloff driven by recession fears.
The $2.4 trillion company has fallen only 16% in 2022 as of the last close, compared to the near 30% declines for the Nasdaq 100 and the S&P 500 Information Technology Index.
But Apple’s dominance is at risk, at least for now, BofA warned.
With consumer spending expected to cool across regions, BofA analysts led by Wamsi Mohan downgraded the recommendation to neutral from buy.
The analysts said demand for Apple’s services has already slowed and product demand is likely to follow, pressure from a stronger dollar will only add to its woes.
While “Apple’s long-term prospects remain favorable,” BofA expects negative estimate revisions and valuation risks in the near-term.
Semiconductor demand is influenced heavily by discretionary consumer spending, BofA analyst Vivek Arya wrote in a separate note.
However, Arya said that “risks to Apple suppliers are in a benign 1%-5% range and hence unwelcome but not a calamity.”
Shares in the iPhone maker slipped to erase $110 billion in market value, extending losses from Wednesday after a Bloomberg report said that Apple is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize.
The report confirmed analyst production estimates and bullish brokerages pointed to the demand in the higher-end iPhone 14 Pro line as a positive for the tech behemoth.
Meanwhile, Rosenblatt Securities analyst Barton Crockett, who had a neutral rating on the stock since initiating coverage in April, raised his recommendation to buy, citing “substantial interest in Apple’s new iPhone 14 Pro Max and Ultra watch.”
“We see reason to believe that consumers in other countries share this enthusiasm, prompting us to embrace more constructive near-term and long-term estimates,” Crockett said.
Apple’s buy ratings have risen steadily going from 28 in the end of 2020 to 37 as of Thursday.
It also has 10 holds and two sell recommendations, according to Bloomberg data.
(Updates stock move and market value loss in paragraph 7.)
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