iPhone 15, US Sales Expected to Slow
Investment Rating Adjusted from 'Overweight' to 'Neutral'
Prolonged High Interest Rates Also a Negative Factor for Stock Price
U.S. financial investment firm KeyBank Capital Markets has downgraded its investment rating on Apple, citing a high likelihood of a slowdown in iPhone sales. The prolonged high interest rate outlook by the Federal Reserve (Fed) and the soaring U.S. Treasury yields are also dragging down the stock prices of tech companies, including Apple.
On the 3rd (local time), Brandt Nispel, an analyst at KeyBank Capital Markets, stated in an investment note, "There is a high probability that (iPhone) sales will face difficulties in the U.S.," and downgraded Apple’s investment rating from 'overweight' to 'sector weight.' He further explained the reason for the downgrade by saying, "The global growth forecasts may also be very aggressive (beyond achievable levels)."
Apple’s stock price surged 32.7% this year alone, leading the tech rally. However, as the outlook for prolonged high interest rates gained traction due to the strong U.S. economy, the stock price has fallen 12.2% since August. Apple launched the iPhone 15 series last month, but it did not lead to a rise in stock price.
KeyBank Capital Markets noted that demand for the flagship new product, the iPhone 15 Pro Max, exceeded expectations but did not create new demand. It is analyzed that consumers who intended to purchase the iPhone 15 Pro, released together last month, chose the iPhone 15 Pro Max instead. Analyst Nispel explained, "This may raise the average selling price, but it means there is almost no change in overall sales volume."
The current excessively high stock price of Apple was also cited as a reason for the downgrade. Nispel analyzed that the stock is trading at a level excessively high compared to earnings and cash flow. He emphasized that for the current stock price to be justified, Apple’s growth outlook must improve. Otherwise, it means that the valuation of Apple’s stock is close to its peak.
The sharp rise in Treasury yields due to the prolonged high interest rate outlook in the U.S. is also a negative factor for Apple’s stock price. The U.S. 10-year Treasury yield, which serves as a benchmark for global bond yields, surpassed 4.8% on the 3rd (local time), the highest level since August 2007. As investors can earn nearly 5% yield by holding safe assets like Treasury bonds, the attractiveness of tech stocks is diminishing. The rise in borrowing costs caused by the surge in bond yields is also limiting capital inflows into the stock market. Consequently, the tech-heavy Nasdaq index has fallen by 9% since August.
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