Why Goldman Sachs Downgraded Apple Stock to Sell

Apple Inc. (NASDAQ: AAPL | AAPL Price Prediction) has been one of the strongest forces in the market over the past decade. Now that the bull market is over and the COVID-19 pandemic is in full swing, analysts are adjusting. Unfortunately, one of the biggest analysts has come out against Apple in a recent report.

Goldman Sachs downgraded Apple to sell on Friday and cut its price target to $233 from $250, as it reduced its earnings estimates for a third time since February 17.

[in-text-ad]

Analysts, led by Rod Hall, said they are modeling a far deeper reduction in unit demand through mid-2020 followed by a shallower recovery heading into 2021. The investment house detailed in its report:

We also assume some lingering ASP (average selling price) weakness as consumers look to economize similar to what we have seen in prior downturns. In addition to this we believe that Services growth slows substantially in 2021 and that Services as a percentage of revenue actually stagnates in that year.

[nativounit]

Overall, Goldman Sachs is expecting a 36% decline in iPhone unit demand in the second quarter and a 24% decline in the first half of calendar 2020. Analysts anticipate the company’s other products will experience a similar trajectory.

Goldman Sachs further detailed:

There are multiple examples of ASPs dropping in the midst of a recession and then remaining weak well beyond the point when units recover. Price weakness could affect 5G design choices too, and limited global travel may cause the delay of the launch of this year’s updated iPhone.

Apple stock traded down more than 2% at $280.32 on Friday, in a 52-week range of $170.27 to $327.85. The consensus price target is $304.56.

[recirclink id=682812][wallst_email_signup]