Stock of Apple Drops After Analyst Warns Sales of Iphones in the U.S Will Be Weak

Apple Inc.'s shares experienced a decline on Wednesday following a recommendation from KeyBanc's Brandon Nispel to refrain from purchasing the stock. Nispel's rationale revolves around the stock's valuation nearing record levels and anticipated challenges in U.S. iPhone sales.

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In premarket trading, the stock (AAPL) dropped by 0.9%, placing it in negative territory for the week. If it closes below $171.21 on Friday, it would mark the fifth consecutive weekly decline, which would be the longest such streak since the seven-week period ending on January 6, 2023.

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Nispel revised his rating on the tech giant from "overweight" to "sector weight," a shift that comes after maintaining an "overweight" rating for at least two years.

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He anticipates that U.S. sales for Apple's fiscal fourth quarter, ending in September, will decline for the fourth consecutive year compared to the previous year. He bases this prediction on his analysis of credit and debit card spending data, which is indicating "modest weakness." Moreover, Nispel expects soft sales from U.S. carriers due to historically low U.S. upgrade rates, a slowing post-paid growth environment, and a focus on higher-priced plans in iPhone promotions.

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Contrary to the Wall Street consensus of accelerating sales growth in all international markets, Nispel expresses doubt about this projection, stating that it is challenging to understand why such growth would occur. He emphasizes the importance of user growth over unit growth but suggests that this argument might not hold in the near term due to a lack of catalysts, resulting in a neutral risk/reward scenario.

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Apple is currently scheduled to release its fourth-quarter results around October 26.

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Nispel also points out that Apple's stock is trading at nearly all-time high multiples concerning enterprise value compared to operating profitability and free cash flow. It is also being valued at a "substantial premium" compared to the Nasdaq, compared to historical trends.

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"To justify upside to [Apple] shares, peak valuations need to be applied or its growth profile needs to inflect higher," Nispel conveyed in a note to clients.

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Year to date, Apple's stock has seen a 32.7% increase as of Tuesday, while the Nasdaq Composite (COMP) has risen by 24.8%, and the Dow has experienced a 0.4% decline.

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