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Why Barclays Downgraded Apple

Why Barclays Downgraded Apple

zerohedge.com / by Tyler Durden / Jan 24, 2017

In an unexpected breach from the herd of sellside optimism, this morning Barclays downgraded Apple to Equal Weight from Overweight, putting some pressure on the stock which was down modestly in the premarket. This is what Barclays said to justify its contrarian view on the world’s largest company.

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Downgrade to Equal Weight– No Growth Rebound or Needle Movers

We are downgrading Apple to Equal Weight and lower our price target to $117 from $119. This call is not on the quarter. Despite easier comps approaching, we do not expect meaningful upside potential in the model and thereby consensus estimates for C2017, limiting the stock’s relative outperformance potential – hence, the downgrade. Apple has a sticky ecosystem and large cash balance, though, providing decent downside support for long-term investors.

Growth rebound could be elusive. Our chief concern is that investors increasingly are hoping for a meaningful exit rate (i.e., 10%-plus Y/Y unit growth) led by the iPhone 8 cycle in 2H C2017. Our view is that customers increasingly mixing down (IP6S in favor of IP7) and maturation of the device-centric consumer electronics adoption wave could weigh on both Apple and the smartphone market. We also are concerned about China and India not emerging as growth catalysts in the next 12 months.