KeyBanc Capital Markets Downgrades Apple Rating
On Tuesday, KeyBanc Capital Markets lowered its rating on Apple from overweight to sector weight. The decision was based on the company’s high valuation and an expected slowdown in growth within the United States.
Reasons for Downgrade
Analyst Brandon Nispel expressed concerns about Apple’s stock trading at elevated multiples and a significant premium compared to the Nasdaq. He noted that the company’s valuation is 7.1 times higher based on enterprise value to earnings before interest, taxes, depreciation, and amortization, and 2.7 times higher based on enterprise value to free cash flow.
Nispel highlighted soft market trends in key regions, particularly in the United States, which could impact Apple’s growth. He mentioned that the US market is likely to experience its fourth consecutive year-over-year decline in the fourth quarter of 2023 and potentially into 2024. This is due to factors such as decreasing phone upgrade rates and iPhone promotions favoring more expensive phone plans.
Anticipated Revenue and Margin Growth
KeyBanc expects Apple’s revenue growth in fiscal year 2024 to be around 3.5%, lower than the consensus estimate of over 6%. Nispel also forecasted a 2.2% decline in iPhone revenue for 2023, followed by a 2.1% increase in 2024. Furthermore, the analyst believes that margins will improve at a slower pace in the coming years.
Impact on Apple Shares
As of now, Apple shares have gained approximately 33% year-to-date. However, KeyBanc’s downgrade may influence investors’ perception of the stock’s future performance.
Source: ‘s Michael Bloom
