Apple investors don’t seem to care after stock receives an uncommon ‘sell’ rating

Apple Inc. (NASDAQ: AAPL) received a rare ‘sell’ rating from the New Street Research analyst Pierre Ferragu, according to a story in The Street. The analyst has a price target of $90 on the stock, which implies a potential downside of 28% from $125, the price at which the stock is currently trading.

Shares of Apple are flat for the day and have not moved much since the issue of the sell rating on the stock. Stock is down 3.4% year-to-date but up 57% for the trailing one-year period.

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Of the 40 analysts tracking the company, only two have a sell rating on the stock. The average price target on the stock is $159.6.

Analyst’s arguments for the sell rating

In his report, the analyst has questioned the iPhone supercycle thesis that is expected to drive the revenue and earnings of the tech giant with greater adoption of 5G-enabled devices in the near term.

Ferrau expects the iPhone sales to slow significantly in the second half of 2021 and does not think that the next versions of the phone will be innovative enough to drive sales. He projects the iPhone shipments for the year 2022 to be in the range of 180 – 200 million, 20% below the street consensus. 

“Most affluent consumers did not see their earnings power much affected by the pandemic, but they saw their spending opportunities shrink. High-end consumer electronics benefited as a result,” Ferrau said. “The iPhone is the best illustration of this, driving close to record shipments in FY21, implying the iPhone 12 is the second best-ever received iPhone, after the iPhone 6.”

“The key question is how things shape up for next year, as the current super-cycle has brought forward demand, the next iPhone line up is likely a “12S” type with limited innovation, and consumers spend less on consumer electronics as the economy re-opens,” he added.

Apple latest earnings results

Apple reported record results for the second quarter ending on March 27 for fiscal 2021. The revenues stood at $89.6 billion ahead of the street estimates of $77.4 billion and up 54% year-over-year. The iPhone revenues also saw a surge of 66% year-over-year reaching $47.9 billion above the estimated $41.4 billion.

Apple posted strong revenue growth for its other segments — Services, Mac and iPads — as well. The earnings per share came in at $1.40 ahead of the street estimate of $0.99.