Apple Inc. Faces Second Downgrade in Early 2024

Just four days into the new year, Apple Inc. has received its second downgrade of the year. Piper Sandler analyst Harsh Kumar has lowered his rating on the technology stock AAPL to neutral from overweight. This downgrade is based on concerns about valuation as well as pressures in the smartphone market.

Concerns about Handset Inventories and Growth Rates

Kumar expresses worry regarding handset inventories in the first half of the year. He predicts that growth rates for unit sales have peaked. This is significant as iPhones account for about half of Apple's revenue. Although Apple experienced growth in the iPhone segment during the September quarter, sales for this category declined in two of the four quarters of its latest fiscal year.

China's Macroeconomic Environment and Legal Clouds

Additionally, Kumar expresses concerns about China's "deteriorating macro environment" and how it will impact Apple's handset business. He also mentions potential distractions from legal issues surrounding the Apple Watch and other areas that could affect investors.

Valuation and Price Target

Apple shares currently trade at about 29 times forward earnings, which is higher than its five-year average multiple of approximately 24. Kumar notes this overvaluation and as a result, he has cut his price target from $220 to $205 in his latest report.

Another Downgrade from Barclays Analyst

This recent downgrade follows one from Barclays analyst Tim Long, who shifted his stance to underweight from neutral.

*For more insights and analysis on Apple's stock and potential innovations, click here.

Apple Shares Experience Declines

Apple shares have encountered a decrease of 0.7% in premarket trading on Thursday, marking a continuation of their downward trend over the past three trading days.

Analyst Downgrades Tech Companies

In a noteworthy development, analyst Kumar has downgraded the shares of several tech companies. He downgraded Microchip Technology Inc., Macom Technology Solutions Holdings Inc., Qorvo Inc., Skyworks Solutions Inc., and Akoustis Technologies Inc. from overweight to neutral. Kumar's concerns about the smartphone market influenced some of these downgrades.

Explaining his decision regarding Skyworks, Kumar stated, "Overall, we are primarily citing macro handset pressure as our main concern as the company has historically executed flawlessly."

Positive Outlook for Micron Technology

However, there is also positive news for Micron Technology Inc. Kumar expressed optimism for the company, lauding the potential for accelerated pricing benefits. He also highlighted the fact that South Korean competitors have reduced production, which should lead to a more balanced supply and demand in the industry.

As a result of this positive outlook, Micron's stock saw an increase of about 1% in premarket trading on Thursday. Kumar upgraded his rating for Micron from neutral to overweight and raised his price target from $70 to $95.

For more information, you can read: Amazon’s stock could be helped by this secret weapon in 2024, BofA says