Apple fundamentals have deteriorated further, argue analysts

© Reuters.

By Sam Boughedda

Lynx Equity Strategies cut its price target on iPhone maker Apple Inc (NASDAQ:AAPL) to $110 in a note to clients on Thursday, ahead of its earnings release after the close.

Lynx analysts told investors that expectations will "ratchet down" as 2023/24 comes into focus. The analysts also noted that earlier last month, Apple shares hit its previous Street low price target of $125 per share, set back in July.

"Over the past three months, investor expectations came in as the illusion of high demand as inferred from long lead times faded. Investors have come around to believe that the long leads times were related to covid-related supply issues out of Foxconn. Now that the Zhengzhou campus is back to normal capacity, the underlying demand issues have become more obvious to investors," argued the analysts.

The analysts added that investor concerns are "merely nibbling at the edge."

"With holiday sales in the West now behind and with the build-up of iPhone units into Chinese New Year too now behind, we perceive the fundamentals to have deteriorated further," they added.

The firm further reduced its Fy23 estimates for Apple and now models Fy24 revenue down y/y vs. consensus modeling up y/y. In addition, they are looking for March quarter revenue to be down ~10% y/y vs. consensus at flat to up slight y/y.

From the macro perspective, they also believe "the Fed's outlook for elevated interest rates into 2024 puts downward pressure on consumer demand vs. current consensus estimate of FY24 revenue up on a 1-year and 2-year stacked basis."

"There is little reason we can think of as to why the iPhone15 cycle should be stronger than the iPhone12/13/14 cycles if overall consumer demand is constrained by high interest rates and as the 5G cycle in US/Europe matures."

Apple shares are trading above the $150 mark Thursday, up more than 3%.