By Senad Karaahmetovic
BNP Paribas Exane analysts downgraded Apple (NASDAQ:AAPL) to Neutral from Outperform with a $140 per share price target (down from the prior $180).
The lowered rating and price target reflect slashed estimates for iPhone and Mac due to production disruptions at Foxconn’s key factory in China. Reuters reported earlier this morning that Foxconn’s production at this facility is back to 90% of its full capacity.
The analysts now expect Apple to ship 224 million iPhone units in 2023 with the lowered estimate reflecting supply chain issues from Foxconn and a more cautious stance on consumer spending for high-end devices. Estimates for iPad/Mac shipments are also slashed so they now expect them to decline by 7% and 9% year-over-year, respectively.
As a result, BNP Paribas Exane slashed the FY23-25 EPS estimates by around 6% to now stand 5%-6% below the consensus.
“Consensus has started to trim estimates, and we believe this will continue and weigh on the shares,” the analysts wrote in a client note.
Based on these estimate cuts, the analysts see Apple stock trading at a “premium valuation,” which is hard to justify.
“We see little reason why Apple should trade at a premium vs its platform peers (now at 22x FY23e PE). As new Hardware products such as AR/VFR and Apple Car might not come before 2024-26, we see no major positive catalyst for the stock and believe the shares are fairly priced,” the analysts concluded.
Apple stock fell nearly 27% in 2022.