Goldman Turns Bearish On Apple, Qualcomm, Projects 36% Drop In Q2 iPhone Sales

Apple Inc. AAPL traded lower Friday after one Wall Street analyst downgraded the stock and said COVID-19 will take a bigger bite out of global smartphone demand than investors realize.

The Apple Analyst

Goldman Sachs analyst Rod Hall downgraded Apple from Neutral to Sell and cut the price target from $250 to $233.

Hall also downgraded QUALCOMM, Inc. QCOM from Neutral to Sell and cut the target from $77 to $61.

The Apple Thesis

The downgrade comes after Goldman cut its forecast for 2020 iPhone demand for the third time.

Hall said he's now forecasting a slower recovery in smartphone sales in 2021 as low consumer confidence reduces smartphone replacement rates. (See his track record here.) 

In addition to his more cautious outlook for iPhone sales, the analyst said he is projecting Apple’s Services segment revenue growth will slow sigificantly in 2021 and Services revenue as a percentage of total revenue will stagnate.

“We also assume some lingering ASP weakness as consumers look to economize similar to what we have seen in prior downturns.”  

Hall cut his 2021 EPS estimate by 12% to $13.17 and is forecasting just $11.31 in EPS this year.

In the near-term, Hall is calling for second-quarter iPhone unit sales to drop 36%.

He also said slumping smartphone demand will negatively impact Apple supplier Qualcomm as well. Goldman cut its 2021 Qualcomm EPS estimate by 10% to $5.04, which is 16% below consensus analyst estimates.

AAPL, QCOM Price Action

Apple shares were down 2.34% at $279.98 at the time of publication Friday, while Qualcomm shares were down 1.24% at $75.90. 

Benzinga’s Take

Apple is not immune to the negative impact of the coronavirus. Like many other companies, the keys for investors are just how bad things will get in the near-term and how long it takes to fully recover.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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Photo courtesy of Apple.