Apple's Long-Term Story Intact Despite Lowered Price Target, Says Analyst

Morgan Stanley's Erik Woodring lowered their price target on Apple (NASDAQ: AAPL) by 2.3% from $220 to $215 on 2023/08/04. The analyst maintained their Strong Buy rating on the stock.

Woodring's decision to lower the price target was based on their assessment of weakness in iPad and Mac sales during the fourth quarter. They explained that this mis-assessment by Morgan Stanley led to a cut of $5 billion in their revenue estimate for Apple.

Despite the revenue estimate cut, Woodring remained optimistic about the long-term prospects of Apple. They emphasized that the company's record installed base is a positive factor that keeps the long-term story rolling.

Apple had recently reported its third-quarter 2023 earnings, which exceeded expectations. The company reported earnings per share (EPS) of $1.26, beating the Zacks Consensus Estimate of $1.19 and showing a 5% increase compared to the same quarter in 2022. Revenue for the quarter stood at $81.8 billion, roughly in line with the Zacks Consensus Estimate but falling slightly short of the previous year's third-quarter revenue by 1%.

During the earnings call, Apple's management provided guidance for the fourth quarter of 2023. They stated that the year-over-year revenue performance in the fourth quarter is expected to be similar to the third quarter. The company also projected a gross margin of 44% to 45% and operating expenses of $13.5 billion to $13.7 billion for the fourth quarter.

CEO Tim Cook highlighted the company's achievements in various areas, including a record revenue in Services driven by over 1 billion paid subscriptions and robust sales of iPhones in emerging markets. Cook also emphasized Apple's commitment to advancing its values and championing innovation that benefits customers and contributes to a better world.

In addition to Woodring's rating update, other analysts also adjusted their price targets for Apple on August 4, 2023. Tim Long from Barclays raised their price target by 12.1% to $149 and maintained a Hold rating on the stock. Srini Pajjuri from Raymond James raised their price target by 11.1% to $180 and maintained a Buy rating. Michael Walkley from Canaccord Genuity raised their price target by 10.8% to $185 and maintained a Strong Buy rating.

According to data from WallStreetZen, 75% of top-rated analysts currently rate Apple as a Strong Buy or Buy, while 20.8% see it as a Hold. Only 4.2% of analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Apple's upcoming year will deliver earnings per share (EPS) of $6.32. If the analysts' forecast proves accurate, it would represent a 5.7% increase in yearly EPS on a year-over-year basis.

Since Apple's latest quarterly report on August 3, 2023, the stock price has declined by 4.8%. However, when considering the year-over-year performance, the stock is up by 9.8%. Apple has outpaced the broader market, with the S&P 500 showing a 7.9% increase during the same period.

Erik Woodring, the Morgan Stanley analyst who adjusted their rating and price target for Apple, is ranked in the bottom 6% of Wall Street analysts by WallStreetZen. Woodring specializes in the Technology and Industrials sectors and has an average return of -7% with a win rate of 51.1%.

Apple Inc. is a global technology company that designs, manufactures, and markets a range of devices, including smartphones, personal computers, tablets, wearables, and accessories. The company also provides various services and operates platforms such as the App Store, Apple Music, and Apple Pay. Apple serves consumers, small and mid-sized businesses, as well as the education, enterprise, and government markets. The company's headquarters are located in Cupertino, California.

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