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Apple (NASDAQ:AAPL) shares are at great risk of a major pullback in case the economic slowdown proves to be greater-than-expected, Goldman Sachs analysts told clients.
Analyst Rod Hall sees a downside risk of 42% for Apple shares if the bear-case scenario is materialized.
His new base-case scenario has Apple shares trading at $130.00 per share, which is a new price target (down from the prior $157.00). The lowered price target reflects decreased revenue forecasts by ~2% in both FY’23 and FY’24.
“In our Base case forecast for Apple, we model a revenue CAGR of 10% from CY’19A – CY’23E which we note is an acceleration from the 3% growth the company delivered between CY15A – CY’19A. We model the company’s EBIT margin and EPS to expand to 28.1% and $5.81 respectively in CY’23 from 24.7% and $3.17 in CY’19… Our Bear case revenue and EPS estimates imply the potential for 22% and 33% downside risk vs. consensus, respectively,” Hall wrote.
Alongside Apple, Commscope (NASDAQ:COMM), Corsair Gaming (NASDAQ:CRSR), and Avaya (NYSE:AVYA) are also at great risk of having a major valuation drawdown with a deeper GDP slowdown. Similarly, Hall estimates that debt-levered Vivint Smart Home (NYSE:VVNT) shares could plunge by 83% in this scenario.
Another large-cap stock that screens poorly is Hewlett Packard Enterprise (NYSE:HPE), with Goldman Sachs analysts estimating a 48% downside risk.
“We would point out that our consumer electronics coverage generally has the most downside risk to fundamentals should a worse downturn in demand, vs. our base case, materialize but our datapoints as of this writing are still consistent with a shallow slowdown similar to our economists’ current forecasts,” Hall concluded.
Apple shares closed at $141.56 yesterday.
