Apple draws second downgrade on weaker iPhone expectations

Apple’s stock was downgraded for a second time in two trading days in light of softer expectations for iPhone production and shipments.

Rosenblatt Securities cut its rating on the largest public company in the U.S. to neutral from buy, telling clients that it will be difficult for the Cupertino, California-based Apple to offset weaker volume with higher selling prices in the second half of 2019.

“Calendar fourth-quarter guidance reflects our cautious view on weaker than expected sell-through and production reductions for iPhone XS/XR,” analyst Jun Zhang wrote. We “downgrade to neutral.”

Apple was downgraded by Bank of America Merrill Lynch on Friday.

Apple — which posted its fifth consecutive week of losses for the first time since 2012 on Friday — finished that day down 6.6 percent, its worst one-day move since January 2014. The company Thursday evening reported iPhone sales that missed estimates, gave disappointing revenue guidance and said it would no longer report iPhone unit sales.

Apple’s stock fell 1.8 percent in premarket trading following the second downgrade.

It also posted revenue and earnings per share numbers that surpassed Wall Street’s expectations for the fourth fiscal quarter.

Still, Rosenblatt’s Zhang held his price target steady at $200, implying 3.6 percent downside.

“We believe Apple’s slightly soft guidance reflects our recent view that Apple will reduce iPhone production (our estimates of a 6-million-unit production cut),” Zhang added. “The iPhone Max has been selling well and will most likely help increase average selling price and gross margin, but we believe it will be difficult for ASP to grow in the second half of calendar-2019.”

The most recent downgrade echoes that issued by Bank of America, with analyst Wamsi Mohan advising clients that slower growth in app store revenue, soft December-quarter guidance and weaker emerging market trends all expected to drag on the stock.

The analyst also lowered his 12-month price target to $220 from $235.

— CNBC’s
Michael Bloom
and
Gina Francolla
contributed reporting.