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In his latest note the analyst points out the negative demand trends in the company’s core territories – namely, that the sell-through in US, China and Europe ‘was down 7.5%’, and in the ROW nations ‘down 2.4% in the March quarter’, whereas a major emerging market such as India saw a 34% YoY pick up, but the figure only represents ~500K unit gain.
The analyst also quotes results from the latest UBS Evidence Lab 2Q23 Smartphones Survey showing “12 month iPhone forward purchase intent is stable to slightly down relative to 6 months ago,” most notably “12 month purchase intent is down 200 bps in the UK, down 100 bps in China, and 100 bps in Japan.”
As such, he doesn’t believe that “the unit TAM and growth outside of the three largest markets is large enough to
drive long-term sustainable iPhone growth above mid-single digits,” and argues that current valuation – “Apple trades at 29x our NTM EPS est, above the 1, 3, and 5 year avg… and ~50% relative premium to the S&P 500” – appears excessive as the shares do not “offer a compelling risk/reward.”
UBS downgrades AAPL to Neutral from Buy “given persistent softness in developed markets and data that indicates growth is likely to remain under pressure,” and raises the Price Target to $190 or “~26x our FY25 EPS of $6.70 plus an evenly weighted probability of Apple’s auto opportunity.”
Shares of AAPL closed at $183.79 yesterday, and are up nearly 40% YTD.
By Vlad Schepkov
