Apple Shares Slide As Goldman Sachs Cuts Rating, Price Target; Sees 'Large Drop' in iPhone Demand

Goldman cuts its forecasts for Apple for the third time since February 17, and now sees "substantially" slower services revenue growth in 2021.
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Apple Inc.  (AAPL) - Get Report shares slipped lower Friday after analysts at Goldman Sachs cut their rating on the world's biggest tech company, and lowered its price target, citing a near-term coronavirus demand hit and a shallower 2021 recovery.

Goldman analyst Rod Hall lowered his Apple rating to "sell", from "neutral", citing the impact the global coronavirus pandemic is likely to have on the group's 2021 earnings. Goldman also cut its price target on Apple by $17 to $233 each, and is modeling a 36% decline in second quarter iPhone unit sales. Hall also cautions that average selling price weakness is "likely to linger" over the coming months and services revenues, a key growth component, will stagnate in 2021 as well.

"We are now modeling a deeper reduction in unit demand through mid 2020," Hall told investors in a research note. "We believe that Services growth slows substantially in 2021 (and forecast) a large drop in iPhone unit demand in CQ2 of 36% Y/Y.”

Apple shares were marked 1.9% lower in early afternoon trading Friday, against a 3.15% gain for the Dow Jones Industrial Average, to change hands at $281.15 each.

Earlier this week, Apple got a boost after China's government-backed Academy of Information and Communications Technology, known as CAICT, said Apple's March iPhone shipments rose to around 2.5 million in March, a five-fold increase from February, as third-party retailers came back online following coronavirus-led shutdowns in the world's biggest smartphone market.

Apple is expected to ship around 197 million iPhones this year, according to Street estimates, and is reportedly planning to launch a 5G version of the handset later in the fall, leading to an acceleration in sales for 2021. On Thursday, Apple announced that it would soon be shipping a lower-cost iPhone SE starting at $399.  

Apple was one of the first blue-chip companies to highlight the potential impact of the coronavirus pandemic when it scrapped its second-quarter revenue guidance in February and noted that iPhone shortages would affect the tech giant's near-term sales.

Apple had said on January 29 that it expected revenue in the range of $63 billion to $67 billion. It was firmly ahead of the Wall Street consensus of $62.4 billion, but is also a much wider range than the company typically provides.

Apple said at the time that all of its stores in China, as well as many of its partners' stores, were closed amid the outbreak, which was first identified in the central industrial city of Wuhan. Those that were eventually re-opened, Apple said, "are open have been operating at reduced hours and with very low customer traffic."