Apple bear throws cold water on ‘supercycle’ story despite strong holiday momentum

Apple bear throws cold water on ‘supercycle’ story despite strong holiday momentum

Apple Inc. may be set up to report a strong holiday quarter, but that’s not enough to warrant a rosy view of the stock, according to one analyst.

Goldman Sachs analyst Rod Hall reiterated his sell rating on Apple

shares late Thursday, arguing that the current iPhone upgrade cycle looks more like a typical redesign cycle rather than the “supercycle” some were hoping for. Hall has been bearish on Apple’s stock since April 2020.

“As a result we continue to expect iPhone replacement rates to resume their ongoing decline in 2021,” he wrote, helping drive his below-consensus forecasts for the full year and particularly the second half of the year. “In addition, our negative thesis on Apple is based on [average selling prices] remaining roughly unchanged in 2021 as consumers shift toward lower priced iPhones and this seems to be beginning to play out in supply chain orders.”

While the COVID-19 crisis limited people’s ability to spend on things like travel and restaurants, potentially leaving them with more spending money for new electronics, Hall expects that a shift toward out-of-home spending as the economy starts to reopen could serve as a “negative catalyst” for Apple shares.

He’s also concerned that Apple is cutting production orders and that customers are showing more of a preference for lower-priced iPhone models. In the more immediate term, however, he thinks the company looks positioned to report a strong holiday quarter given “solid consumer demand,” especially with people working and studying form home.

Hall upped his price target on Apple’s stock to $85 from $75 in his latest note to clients. He remains one of just a few analysts to have a bearish rating on Apple shares. Of the 40 analysts tracked by FactSet who cover the stock, 27 have the equivalent of buy ratings, 10 have hold ratings, and three have sell ratings, with an average price target of $131.74.

Apple shares have gained 7.7% over the past three months as the Dow Jones Industrial Average

has risen 8.2%.

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