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