Apple stock has been downgraded by Bank of America, citing waning consumer demand. Apple stock has been holding up pretty well compared to SPY 0.00 and other mega cap stocks. It’s only down 19.76% YTD, including today’s 5% drop. In comparison, SPY is down 23.39% YTD . GOOGL, MSFT and AMZN are all down around 30% YTD while META is down a whopping 60% YTD.
Well, I suppose in today’s market, nothing is bullet proof. The moment a sign of weakness is shown, things start to break. With consumer spending expected to cool across regions, BofA analysts said demand for Apple’s services has already slowed and product demand is likely to follow. The Strong US dollar is also hurting their numbers as a large percentage of Apple’s sales is international.
Furthermore, according to another Bloomberg report, Apple is backing off plans to increase production of its new iPhone 14. They had originally planned there would be a surge of demand for iPhones compared to last year. But apparently things didn’t go quite as expected. Hence, they are cutting back the planned 6 million units expansion for iPhone 14.
Overall, I believe Apple stock is quite richly valued. Its Enterprise/EBITA ratio is the highest compared to the same ratio for MSFT, META and GOOGL. 75% of Apple revenue is from hardware, which is lower margin and potentially higher volatility than subscription based software business. I think Apple stock has more room to fall. But the good news is that once it goes down another 10-20%, it might signal the bottom of the market. Apple is a blue chip stock after all.