BofA Securities downgraded Apple Inc’s (NASDAQ:AAPL) stock to “Neutral” on Wednesday while raising its price target from $420 to $470, an 8% upside, saying there are many positives for the Cupertino-based tech giant but risks as well.
In a commentary to his firm’s clients, head analyst Wamsi Mohan noted that over the last two months Apple shares have hit new highs while estimates for FY2021 have largely stayed unchanged.
According to Mohan — whose $470 AAPL price target assumes single-digit year-over-year (y/y) revenue growth even though he sees “high-teens” y/y growth as highly probable thanks to positives like Apple’s loyal user base, its still growing installed base, and a strong free cash flow — the ticker’s risk/reward is more balanced at current price levels.
Apple stock, which is up nearly 50% year-to-date, recently traded at $436 & change, down 0.45%.
What led Mohan to a “Neutral” from “Buy” rating are what he sees as risks in the 5G iPhones, which could affect product gross margins from higher bill of materials costs. There is also the risk of services margins getting squeezed by content amortization costs. Apple also faces tough comps in 2021, a possible anti-trust regulation on the App Store which is the only way Apple device owners can purchase and install software, as well as the potential risk of a higher tax rate in the event of a Biden win in the U.S. elections in November, Mohan said.
Apple shares were down 0.23% to $437.63 in midday trading Wednesday. Of the 46 analysts who cover Apple stock, 28 have ‘Buy’ ratings, 14 have ‘Hold’ ratings, and 4 have ‘Sell’ ratings. The average 12-month price target for the name is $371 while the high price target is $500. The consensus target is $416.
Reference: The Street