Apple’s Product Adoption Leaves Wall Street Wary

In the wake of Apple’s July announcement of its latest quarterly report, one sell-side firm lowered its price target and rating on the name. Now, and more recently, another shoe has dropped.

As reported by The Wall Street Journal on Wednesday (Aug. 5), analysts at Bank of America Merrill Lynch took their target price to $130 from $142 and also lowered their opinion to “neutral” from its previous “buy” designation.

In explaining the changes, the sell-siders said the tech giant faces “near-term headwinds,” and there is continued deceleration in the iPhone’s growth rates. That trend is enough to bring about a “significant slowdown in revenue growth.” And at the same time, it is taking time for newer products, ranging from the Apple Music service to Apple Watch to Apple Pay, to gain traction.

The analysts said that the new models of the iPhone will be tantamount to an “incremental upgrade” but will not, at least over the near term, push a “significant change in the pace of share gains.” Nor will there likely be announcements tied to incremental capital return corporate actions.

And Merrill Lynch is not the only firm that downgraded the stock since the July Apple results. As WSJ reported, a Cowen’s analyst lowered his rating on the stock to “market perform” from “outperform,” with a concurrent drop in the price target to $130 from $140 last month, for at least some of the same reasons cited by Bank of America Merrill Lynch more recently this week.

“With a tepid iPhone number amid mounting China demand concerns and supply-side field work suggesting new iPhone builds are down cycle/cycle for the first time, we are downgrading [Apple],” Timothy Arcuri, the Cowen analyst, wrote in a note that was sent to clients on July 22.

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