Apple shares have beaten the S&P 500 so far in 2022, but analyst sees 'risk to this outperformance' heading into company's next fiscal year
Apple Inc. has beaten the broader technology industry this year, but a Bank of America analyst isn't sure that the stock can keep it up.
Analyst Wamsi Mohan downgraded Apple's stock $(AAPL)$ to neutral from buy Thursday, writing that demand trends could worsen heading into the new fiscal year.
"Shares have outperformed significantly [year to date]...and have been perceived as a relative safe haven," he wrote. "However, we see risk to this outperformance over the next year, as we expect material negative [estimate] revisions driven by weaker consumer demand."
Apple shares have declined 20% so far this year, as the S&P 500 has fallen 24% and as the S&P Composite 1500 Information Technology sector has declined 31%.
The stock is down 4.91% in Thursday's session.
Mohan worries about potential weakness in the iPhone 14 cycle given the economic pressures on consumers, particularly in Europe. While some analysts have been upbeat about the performance of the company's higher-priced iPhone 14 Pro models even as base-level iPhone 14 models seem to be disappointing, Mohan said that a stronger mix of Pro models won't be able to offset declines in revenue or profits if overall unit sales fall.
Additionally, he sees "incremental risk of deceleration" for the company's services business and worries that the iPad segment could see a "reversion to pre-COVID levels." The Mac business could "partially" revert back to pre-pandemic levels, Mohan continued.
Then there are the challenges Apple faces from the stronger U.S. dollar. "[W]hile hedges/pricing provide some offset, demand destruction is likely," Mohan wrote.
In his latest note, he took the opposite view of Rosenblatt Securities analyst Barton Crockett, who upgraded Apple's stock Thursday. Crockett was more upbeat about demand dynamics in the iPhone business, writing of strong consumer buying intent, especially for the Pro line, based on the results of his recent U.S. consumer survey.
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Analysts on the whole remain overwhelmingly bullish on Apple shares: Just three of the 41 analysts tracked by FactSet who cover the stock have sell ratings, while six have hold ratings and 32 have buy ratings. The average price target listed on FactSet is $181.92, nearly 28% above current levels.