A Rare Wall Street DowngradeSeptember 24, 2020
Something unusual has happened on Wall Street regarding Apple. Earlier this week, UBS issued a rare stock rating downgrade, from “buy” to “hold”.
To be fair, the change in opinion happened when coverage switched analysts within the same sell-side firm. Still, this could be a good opportunity to look at the less-than-bullish opinion from an expert on Apple’s stock. See bullet points below.
Counterpoints to bullishness
- Service revenues linked to iPhone sales should decelerate. While services have risen over 20% per year since around 2016, product sales have increased in the low-single digits, and theorerically both trends should converge.
- Shares tend to outperform ahead of the iPhone launch, and underperform after it. The analyst, therefore, believes in a repeat of the “sell the news” wave observed in previous years.
- Valuation does not match growth trajectory. The analyst notes that a forward earnings multiple of 29x is “at 1.5 standard deviations above its trailing one-year mean” – which basically means unusually elevated, historically speaking.
For the Apple Maven’s take on these three arguments, watch the brief video above.
Read more from the Apple Maven:
Apple vs. Rest Of FAAMG: Who Has Held Up Best?
Previewing Apple’s Week: iPhone Anticipation
What Investors Should Expect Of The iPhone 12
(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)