Nomura Downgrades Apple, Says iPhone X Is Priced In

Nomura is calling an end to Apple Inc. AAPL's bull run, saying in a Tuesday note that the stock no longer has sufficient catalysts to support continued upside.

The Analyst

Nomura's Jeffrey Kvaal downgraded Apple's stock from Buy to Neutral with a price target lowered from $185 to $175.

The Thesis

After a more than 50-percent gain in Apple's stock since the start of 2017, now is the time to downgrade, as the iPhone X supercycle is mostly priced into the stock, Kvaal said in a note. (See Kvaal's track record here.) 

Unit growth and, to a lesser degree the iPhone's average selling price, are "well-anticipated" by consensus estimates and are reflected in the stock's "full multiple," the analyst said. 

Apple's iPhone X shipment times fell to just one day by Dec. 18 despite light promotions in the U.S., Kvaal said. "This suggests limited upside to the consensus 79 million units," he said. Looking forward to the second quarter, Kvaal said demand is likely to "slip," as Apple typically sees a 25-percent seasonal decline.

Apple's high margins and fast-growing services business accounts for around 15 percent of sales and is a "derivative of unit sales," Kvaal said. Tax reform from the federal government would "help others more than Apple," he said, adding that " we are not convinced repatriation will be a significant boon."

Bottom line, Apple is still a "reasonable investment" for those who can wait between the company's supercycles, the analyst said. 

"We expect the iOS user base, the key value driver, to continue growing." 

Price Action

Shares of Apple were trading lower premarket by around 1 percent at $175.05 after hitting a new all-time high of $177.20 on Monday.

Related Links:

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Apple Analyst Shrugs Off Demand Concerns: 'Gross Margin Is The Key'

Photo courtesy of Apple.