Goldman Sachs has downgraded Apple stock to ‘sell’, telling investors that a downturn in shipments and consumer demand will impact sales of iPhones.
Analysts believe that a slowdown in sales caused by coronavirus restrictions will be compounded by a decrease in the average selling price (ASP) of consumer products such as smartphones if, as expected, there is a global recession.
Given iPhones are at the higher end of the market, they could be particularly susceptible to these trends and Goldman Sachs believes a shipment drop of 36 per cent is possible.
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Apple recently launched an updated version of its entry-level iPhone SE model, a move which would help the company in the mid-range market, but may not attract users of its flagship models that are used to more advanced features.
“We do not assume that this downturn results in Apple losing users from its installed base. We simply assume that existing users will keep devices longer and choose less expensive Apple options when they do buy a new device,” the note reportedly said.
Reuters notes however that other market analysts maintain ‘buy’ or ‘hold’ ratings for Apple stock.
The spread of Covid-19 has had a major impact on smartphone sales already. Just 61.8 million smartphones were sold in February 2020, down from 99.2 million last year. This 38 per cent decline is the biggest decline in the history of the market.
Supply chain disruption has been eased by the reversal of some restrictions in China and it is believed there will be an upturn in 2021. CCS Insight says delayed purchases and the wider availability of 5G are set to see sales increase by 12 per cent in 2021, outpacing 2019 by four per cent, while in 2022 there will be a growth rate of 13 per cent, leading to sales surpassing 2 billion.
The first 5G iPhone is still expected to be launched later this year.
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Via Reuters
