Apple (AAPL) shares moved higher Wednesday, after closing below the $2 trillion market value threshold for the first time in nearly two years, as Wedbush analyst Dan Ives cautions that demand headwinds could challenge the stock's near-term growth prospects.
Ives clipped $25 from his Apple price target, lowering it to $175 per share, but held his 'overweight' rating in place amid what he described as "mixed" supply chain checks and the possibility of reduced Mac and iPad orders and stable iPhone 14 demand.
Supply chain pressures linked to the Foxconn-operating 'iPhone City' plant in Zhengzhou, China will likely push between 8 million and 10 million iPhone units into the March quarter, Ives said, although he stressed that the current demand environment is "more resilient than the Street is anticipating" and largely reflected in Apple's recent share slide.
Apple stock has fallen nearly 10% over the past two months, compared to a modest 2.8% gain for the S&P 500.
That view appears to be supported by data from JPMorgan, which noted Wednesday that U.S. carriers increased their iPhone sales over the month of November even as supplies of higher-end iPhone 14 Pro models remained pressured from supply chain disruptions.
"While tech stocks remain enemy #1 on the Street now in the rising rate environment/hawkish Fed, Apple remains the laser focus of the tech bears as this name has held up much better than the rest of the beaten down tech sector over the past year," Ives said. "To this point, we believe Apple has a unique installed base demand story that can withstand the Category 5 macro pressures around the corner better than its tech peers and should remain a Rock of Gibraltar name into 2023."
"On a sum-of-the-parts valuation we continue to believe $200 is the right valuation for Apple reflecting its core services business with a base case valuation in the $175 range," he added. "We are lowering our price target from $200 to $175 reflecting a more base case valuation in this uncertain environment as some demand headwinds starts to creep into the Cupertino growth story."
Apple shares were marked 2.36% higher in early afternoon trading Wednesday $128.03 each. The stock closed at $125.07 last night, slipping below the $2 trillion market cap threshold for the first time since March of 2021.
Other analysts, however, are concerned that a pullback in consumer spending, alongside still uncertain supply chain forecasts, will will soften December earnings for the world's biggest tech company.
Exane BNP analyst Jerome Romel cut his rating on Apple stock to 'neutral', from 'outperform', and lowered his price target by $40 to a share to $180 each, in a Tuesday note that highlighted weakened iPhone and Mac shipment estimates and cautious consumer spending.
Romel's views partly echo concerns expressed late last month by JPMorgan analyst Samik Chatterjee, who lowered his Apple price target by $10 to $190 per share while noting that the ongoing Covid disruption in China would take some 4 million from the tech giant's December iPhone sales, which he pegs at around 70 million.
Chatterjee, however, maintains an 'overweight' rating and says any hit to December quarter supplies will be made-up by follow-on demand over the three months ending in March.
Apple will publish its December quarter earnings on January 26, with early estimates indicating a bottom line of $1.98 per share on revenues of $122.7 billion.
