Apple Analyst Continues To Recommend Owning Stock Despite Reducing Price Target — Here's Why

Apple Inc. AAPL reported fourth-quarter results that exceeded estimates but the qualitative guidance issued on the earnings call did not go down well with investors.

What Happened: KeyBanc Capital Markets analyst Brandon Nispel maintained an Overweight rating on Apple shares and reduced the price target from $185 to $177.

See Also: Apple Sees Revenue Hit In Current Quarter With 'Challenging Compare' In Store For Macs

Apple did not offer any formal guidance, as has been the recent practice, Nispel said. Giving his key takeaways, the analyst said:

• Revenue will slow from the 8% year-over-year rate in the fourth quarter.
• A 10-point year-over-year forex headwind is expected for the first quarter.
• Mac revenue will decline substantially from a year ago.
• Services revenue will grow, albeit at a slower pace.

Making sense of the information gleaned from the call, Nispel said he continues to expect relatively healthy iPhone growth of 7%. Citing Microsoft Corporation’s MSFT guidance for Windows OEM declining in the high 30s, Mac revenue could decline by a mid-30s percentage year-over-year, he added.

The analyst now expects 3% revenue for the Services business due to a slowdown in Alphabet Inc.’s GOOGL GOOG Google traffic acquisition cost, a difficult macro environment for advertising and an anticipated slowdown in mobile gaming.

Nispel reduced his first quarter and 2023 revenue estimates by 7.5% and 3.2%, respectively. The EBITDA estimates were also trimmed by 9% and 6.3%, respectively.

Notwithstanding the near- to medium-term setbacks, the analyst said he continues to recommend owning Apple shares. If not for the forex headwind, Apple is growing revenue in double digits and gaining share, driving toward a net cash position, he added. This, the analyst said, will provide healthy shareholder returns.

Price Action: In premarket trading, Apple shares were advancing 0.44% to $145.44, according to Benzinga Pro data.

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