Personal Finance

Alternative Facts? Apple, Inc. Gets a Strange Downgrade

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Apple (NASDAQ: AAPL) shares sat out of the stock market rally on Tuesday, largely because of a downgrade from Barclays . Analyst Mark Moskowitz expects the smartphone market to stagnate this year. Moreover, unlike many other analysts, he doesn't see the upcoming 10th anniversary iPhone as a major growth catalyst.

Indeed, Moskowitz asserts that iPhone buyers are increasingly opting to buy older models like the iPhone 6s in order to save $100, rather than paying up for Apple's latest and greatest designs. If consumers are becoming more focused on price than design, they might not care that much about the major design changes expected in the next-generation iPhone.

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Demand for the iPhone 7 Plus has been red-hot. Image source: Apple.

Partially offsetting this, the dollar has continued to rise against some key foreign currencies (mainly the British pound and Chinese yuan). But that just means that even a small ASP increase would indicate significant year-over-year improvement in the iPhone product mix.

Are expectations too low?

Since bottoming out around $90 in May, Apple's stock price has shot up by 34%. This suggests that investors are starting to become more optimistic about the company's prospects.

Nevertheless, many Wall Street analysts still have very low expectations. In fact, analysts expect Apple to report a year-over-year EPS decline next week, despite the positive iPhone usage data and strong growth in Apple's services business.

If Apple is able to beat the estimates by reporting modest earnings growth for Q1 and offering a solid outlook for Q2, shares of the tech giant could begin 2017 with another rally.

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Adam Levine-Weinberg owns shares of Apple and is long January 2018 $90 calls on Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool is long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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