Does Apple Inc. AAPL have a dependence problem? Analysts at HSBC say the iPhone maker's years of growth from hardware units is "broadly over."
What Happened
Apple's growth story over the years has com mostly from selling new hardware devices to new users but this is no longer the case, CNBC reported HSBC analysts as saying in a note. Instead, the company now depends on higher average selling prices and development of services to show growth. A flat unit growth has impacted Apple's stock price and the weakness carried over to some of its key suppliers.
HSCB downgraded Apple from Buy to Hold.
Why It's Important
Despite a slowdown in hardware sales, some investors will make the argument Apple is a luxury brand which by default warrants a premium valuation in the stock. However, HSBC said Apple doesn't deserve a higher earnings multiple although the stock at current levels isn't "particularly expensive."
What's Next
Looking forward, Apple will see its prior "very high" double-digit revenue growth slow down to a "more pedestrian" mid single-digit growth which will impact the stock's investment case, the analysts wrote. As such, investor enthusiasm could "be the victim of a lengthy transition phase as the focus shifts."
The research firm revised its price target from $205 to $200, which still implies upside from Monday's closing price $184.82.
Apple's stock traded around $181.46 at time of publication, down 1.8 percent.
Related Links:
Another Apple Analyst Warns Of Soft iPhone, Overall Smartphone Demand
Microsoft's Valuation Catches Up To Apple — How Did It Happen?
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