Apple Share Price Drops As Goldman Cuts Price Target
More bad news for Apple shares (NASDAQ: AAPL) this week as Goldman Sachs drops their Apple stock price prediction, causing the share price to fall. Goldman Sachs cited declining demand for Apple products and a weak reception for the arrival of the iPhone XR for their price cut.
After Sachs published their analyst note regarding the state of the company, Apple share price dropped by 3 percent on Tuesday (early trading).
Goldman Sachs analyst Rod Hall said this on Tuesday: “In addition to weakness in demand for Apple’s products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received,”
Goldman Sachs slashed Apple’s price target from $209 to $182. Apple shares entered a bear market on Monday after escalating concerns regarding to iPhone production became public. A bear market is defined as a stock dropping below 20 percent of its highs.
Apple shares entered a bear market after losing 20 percent from its 12-month high of $233.47, representing a $276 billion loss in market cap value as Apple share price hit $179.32 on Tuesday. This $276 billion loss is around the same amount of value of Walmart’s market cap. It is not a good sign when a company loses a ‘Walmart-sized chunk’ out of its value.
An important metric that analysts look when determining demand is the production volume of iPhones. Apple has lowered the amount of production orders of all its newer generation of iPhones (September released phones). Apple continued to shock investors when it announced that it would no longer be reporting the individual sales numbers for the iPad, iPhone and Mac line. The sales numbers of all Apple’s hardware products will be combined into one. Investors saw this as a problem because it seems like Apple are trying to cover up declining sales.
Apple Share Price Analysis
Overall, there has been a series of challenges that Apple has had to face in Q3. These problems relate to the overvaluation of the iPhone XR to weak Chinese demand due to a strong dollar. For investors, these problems are not welcomed as each challenge the company faces chips away at Apple’s market cap.
Apple seems to be aware that iPhone sales volumes are weakening, which they try to offset with higher unit prices. As time goes on, these attempts at driving revenues are being tested.
“In our experience with mobile phones, when pricing power is lost, consumer technology companies tend to either lose margins or market share or both.” Hall said this in regard to Apple’s pricing of the iPhone models.
Despite a weaker-than-expected Q3 report, I think that Apple share price will increase as iPhone demand stabilizes. Apple will be releasing a series of new products in the next few years which will boost revenue, which means the stock has upside potential. The recent fall in Apple stock price also creates a good buying opportunity, there is also a higher dividend yield on Apple stock.