Apple, Inc. (NASDAQ:AAPL) and Qualcomm, Inc. (NASDAQ:QCOM) are among the high-profile tech names that have consistently delivered due to superior fundamentals and strong market positioning.
Here's why a JPMorgan analyst is dropping the two stocks from the firm's focus list.
The Tech Analyst: Samik Chatterjee maintained Overweight ratings on Apple and Qualcomm. The analyst has a $210 price target for Apple and $240 price target for Qualcomm.
The Tech Takeaways: Chatterjee said there are indicators of a reversal of "value over growth" momentum, as he said the potential for a recession is driving hardware investors toward quality and growth even if it comes at an expensive valuation.
The macro weakness will likely impact the consumer end market more materially, and if the headwinds continue to persist longer, business and commercial spending will moderate, the analyst said.
JPMorgan expects consensus earnings estimates downgrades for companies with greater exposure to the consumer sector in the first half. A slowdown in business and commercial spending and consensus earnings downgrades could come toward the end of the year, Chatterjee said.
Why Apple iPhone SE, Services Could Be Hit By Consumer Softness: Moderation in consumer spending could temper expectations for upside from the recently-launched iPhone SE, Chatterjee said.
The weakness could be offset by product cycle momentum for the iPhone 13, the analyst said.
Apple Services segment will take a hit from the material moderation of gaming engagement in China, dragged by weaker consumer spending and tougher comparisons, the analyst said.
Android Market Weakness To Moderate Growth At Qualcomm? Qualcomm could suffer due to the weakness in the smartphone market focused on the low- to mid-end Android market, Chatterjee said.
All the same, the chipmaker could fare better than its peer group due to its exposure to the high-end smartphone market, in combination with share gains with Android OEMs, as well as its diversification into non-smartphone markets, he said.
Qualcomm will still see moderation in upside through the year, the analyst said.
Related Link: Apple Stock Extends Winning Streak To 11 Sessions: Does The Rally Have More Legs?
Arista, Ciena Go Into Focus List: Chatterjee said he is adding Arista Networks, Inc. (NYSE:ANET) and Ciena Corporation (NYSE:CIEN) to the focus list.
The former will benefit from a greater resilience in cloud demand and improving supply, while the latter will draw strength from the resilience of cloud and telecom demand, as well as improving supply, the analyst said.
The Tech Price Action: Apple shares were down 1.32% at $172.31 midday Friday and Qualcomm was slipping 5.35% to $144.65, according to Benzinga Pro.
Arista shares were near-flat at $139.04, while Cien shares were gaining 0.48% to $60.92.
Related Link: Why Apple Has 'Little To Lose, A Lot To Gain' By Expanding Its Services To Android Devices
