Apple Downgraded As Analyst Foresees A Wave Of New Challenges

Amid all-time high territory, Apple Inc. AAPL was hit with a downgrade Monday, due to a wave of new challenges that may limit future upside.

The Analyst

James Cordwell of Atlantic Equities downgraded Apple from Overweight to Neutral, but kept his $190 price target.

The Thesis

While Apple is expected to see an earnings boost from tax reform, the analyst believes it's valuation won't be too challenged.

Fears that iPhone demand is starting to soften primarily led to the downgrade.

iPhone X saw robust demand in the first quarter but things are starting to slow up considerably and may weigh on second quarter figures according to the analyst note.

Stories have been circling regarding the potential discontinuation of the iPhone X due to weak demand, posing risk that second quarter guidance may fall short and the current iPhone cycle fails to deliver upside from here said Cordwell.

"[W]hile there are clearly ways for the company to continue to drive iPhone growth beyond FY18 (eg via a Plus-sized iPhone X)," Cordwell said, "tougher ASP comps and the lack of a volume ‘supercycle’ with the iPhone will leave it difficult to build conviction in future cycles."

There are also concerns the world’s biggest company's position at the center of consumer technology is at risk, particularly due to growing consumer interest in voice-based devices, where Apple faces significant competition.

Apple is set to report first quarter earnings Feb. 1.

Price Action

Shares of Apple traded down less than 1 percent Monday to the $177 area.

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