In a rare move, Apple was downgraded from Overweight to Sector Weight by Pacific Crest. In a note on Sunday, analyst Andy Hargreaves suggested that clients buy Alphabet with the money they earn from selling Apple stock, reports CNBC.
A rare downgrade for Apple despite iPhone 8 cycle
Just a couple of days ago, BofA/Merrill Lynch analysts raised their price target on Apple from $155 to $180. Analyst Wamsi Mohan stated that the company’s total addressable market has increased, as iPhones are packed with health care and health monitoring apps. The analyst stated that the company is sitting on a cash pile and can access the majority of the market through mergers and acquisitions.
While Mohan’s ratings and forecasts are in line with the Street and investors’ expectations, Hargreaves’ analysis comes as a surprise, especially considering that he expects Apple to deliver a strong performance in the iPhone 8 cycle “while providing relatively little weight to risks through the cycle or the potential for iPhone sales to decline in FY19.” The analyst noted the risks around gross margins, elasticity, supply issues, and the “likelihood for declines beyond the iPhone 8 cycle.”
It is widely believed that the iPhone 8 will be released this fall, the usual time of launching new iPhones. Hargreaves, however, believes that the supply chain will encounter some challenges that might restrict the supply of the iPhones to be released for sale this year.
Apple shares have surged 34% this year, and just last month, they clocked a fresh lifetime high, as investors are bullish on selected technology stocks. Hargreaves stated that the stock will dip $10 from the current levels to $145 per share 12 months from now.
What to expect at WWDC?
What’s interesting to note is that the downgrade comes on the heels of Apple’s developer conference, which starts today and where the new mobile operating system will likely be launched. Meanwhile, some analysts are expecting a preview of Apple’s 10th anniversary flagship, the iPhone 8, at WWDC event.
Recently, JPMorgan analyst Rod Hall stated that there is a strong possibility the Cupertino-based company will reveal some details about the iPhone 8 at the event. Hall is expecting “a large form factor change as well as new 3D scanning features.” The analyst expects the firm to unveil a new TV device and the much-anticipated Siri speaker at the event. However, many analysts believe there is no substance in Hall’s prediction.
Apple’s WWDC starts today and runs until June 8. While the company has already renewed its Mac Pro desktop and iPhone SE, analysts expect there is more in the pipeline after WWDC. Analysts have titled Apple’s rollout plans as a super cycle, mainly because of the redesigned iPhone. Further, reports are abuzz that entirely new product lines will also be launched this year.
While some expect upgrades to Siri, a new iPad and some software, one item that is hogging the limelight is the augmented reality glass. Time and again, CEO Tim Cook has expressed his interest in the concept. Like Microsoft made the HoloLens available to developers initially, Apple might unveil the new AR glass to developers first and later to the masses.