A band of Apple Inc.’s most bullish fans on Wall Street are growing increasingly bearish over concerns that holiday iPhone sales have been weak and that the company needs new breakthrough products to fend off rivals Google Inc. and Samsung Electronics Co.
At least five analysts have cut their price targets for Apple since Dec. 16, with some saying Apple’s purchases from suppliers indicate iPhone and iPad sales may not meet projections. Because the two products are Apple’s largest sources of revenue and profit, any slowdown in demand would bode ill for growth prospects.
The reports from Citigroup Inc., Pacific Crest Securities, Mizuho Securities USA, BMO Capital Markets and Canaccord Genuity mark a reversal from earlier this year, when analysts were racing to issue upbeat predictions, with at least two saying Apple would top $1,000. Instead, the shares have dropped more than 25 percent from a September record amid speculation the iPhone is saturating the market, ratcheting up pressure on Chief Executive Officer Tim Cook to introduce a new hit product.
“Apple is feeling the heat,” said Michael Obuchowski, a portfolio manager at North Shore Asset Management LLC, which owns Apple shares. “There is a lot of pressure on Apple to bring new magical devices to the market, and that hasn’t happened in a while.” He said the latest iPhone and iPad mini are incremental improvements on previous devices.
Apple, based in Cupertino, California, rose 2.9 percent to $533.90 at the close in New York. Even with the decline since September, the shares have gained 32 percent this year.
Glen Yeung, an analyst at Citigroup, wrote in a note on Dec. 16 that Apple’s Asian suppliers have been reporting cuts in orders, raising questions about the iPhone 5’s strength. The bank reduced its rating on Apple’s stock to neutral from buy and cut its price target to $575 from $675.
With Apple projected to have won 230 million iPhone users by the end of the year, the company’s customer growth will start to ebb because it is approaching a saturation point, said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon. He scaled back his prediction for new iPhone customers in 2013 to 62.4 million from 84.3 million.
“Global consumer demand for iPhone 5 is not as strong as we anticipated,” Hargreaves said in a report, in which he cut his target price for the stock to $565 from $645. “Although we believe iPhone 5 remains the best-selling high-end smartphone on the market and is likely gaining significant share right now, a combination of market saturation, weak global demand and incremental innovation that has surpassed consumer demand” are probably hurting iPhone sales, he wrote.