Apple: Bernstein’s Analysts ‘Cautious’ on iPhone 14 Cycle, Valuation

By Senad Karaahmetovic 

Bernstein analysts, once again, reiterated their cautious stance on Apple (NASDAQ:) shares, which they rate Neutral with a $170 per share price target.

The analysts are worried that Apple may have been a COVID beneficiary, given that their operating profit is higher by over 60% than before the pandemic. Moreover, the analysts are concerned about weak iPhone 14 unit sales, despite the belief that the average selling price (ASPs) could be up about 5% YoY.

“Elongating replacement cycles following two strong years of sales and an increasingly pressured consumer, especially in China, could cause the unit sales to come in weaker than expected,” the analysts wrote in a client note.

Bernstein forecasts that the Services growth will be in the mid-teens in the near-to-medium term.

“Apple has done an excellent job in driving ARPU growth in Services due to higher attach rates and new Services. Advertising and App Store account for 60% of Services revenues and 80% of Services operating profits today,” the analysts added.

Finally, analysts are also concerned about Apple’s valuation as shares trade “at the high end of its historical relative valuation range.”

“Notably, Apple is the only stock among the 10 largest tech names to outperform this year, despite results being largely in line with expectations,” they concluded.

Elsewhere, Morgan Stanley analysts noted that Phone 14 Pro Max & Pro lead times remain elevated, which marks “the 1st & 3rd strongest of all models launched in the last 6 yrs.”

“Lead times in key int’l markets are even longer than in the US, despite Y/Y price increases, a positive surprise amid cont’d demand concerns,” the analysts wrote in a research note.

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