Apple falls as BofA hits it with rare downgrade on worries over weaker consumer demand

Apple (NASDAQ:AAPL) shares fell on Thursday as investment firm Bank of America hit the tech giant with a rare downgrade, citing worries over weaker consumer demand.

Analyst Wamsi Mohan lowered his rating on Apple (AAPL) to neutral from buy and cut his price target to $160 from $185, while also lowering fiscal 2023 estimates. With the stock only down 16% year-to-date compared to the broader indices, it has outperformed, but that may be coming to an end, Mohan noted.

“We see risk to this outperformance over the next year, as we expect material negative [estimates] revisions driven by weaker consumer demand (Services already in slowdown and we expect products to follow),” Mohan wrote in a note to clients.

The analyst lowered his fiscal 2023 estimates to revenue of $379B and $5.87 per share in earnings, below the consensus estimate of $412B and $6.46 per share.

Apple (AAPL) shares fell 2.5% to $146.19 in premarket trading.

Mohan noted that the iPhone 14 cycle may be weaker than anticipated as risks to consumer spending remain elevated and lead time data started to moderate, even for Pro models. There’s also concern for its near-term Services business, as there is an “incremental risk” of deceleration, even with the App Store and Licensing accounting for 60% of revenue.

Other worries include a stronger mix towards the iPhone 14 Pro not being able to offset a decline in revenue and profit if overall iPhone units decline, a reversion to pre-COVID levels fr the iPad and Mac, as well as pressure from a stronger U.S. dollar.

Mohan added that he now sees iPhone sales figures at 219M, compared to Wall Street estimates of 245M, while iPad revenue figures should be roughly $22B, well below the $31B Wall Street is expecting. Services revenue is also expected to come in below consensus estimates, at $85B compared to $88B.

Cupertino, California-based Apple (AAPL) confirmed earlier this week that it would produce some iPhone 14 units in India.

Analysts are largely cautious on Apple (AAPL). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates AAPL a HOLD.