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Last month Rosenblatt downgraded Apple to a sell rating from down from neutral, and today they elaborated on why they believe Apple (NASDAQ:AAPL) stock is underweight.
We've been waiting with bated breath for word on when or if President Trump would follow through on his promise to slap taxes on the entirety of Chinese imports. Apple produces a large majority of its products in China and would be forced to pay a 10 or even 25% tariff to import its phones and other devices should the tariffs get implemented. Needless to say, consumers would be forced to think twice when faced with such a large price increase brought overnight.
A few analysts have voiced their doubt about Apple's ability to maintain sales numbers (or profit margins) in light of these potential tariffs, and last month Rosenblatt Securities, based out of New York City, NY issued a downgrade on Apple stock citing uncertain demand outlook for the next year.
Apple downgraded due to chronic weak iPhone demand
Today an analyst at Rosenblatt spoke out on the issue and said that it wasn't the situation with U.S. import tariffs that prompted the downgrade. According to the firm, "We continue to believe that even without tariffs, Apple’s iPhone sales will continue to be weak."
Jun Zhang is the senior analyst at Rosenblatt who is leading coverage of Apple, and he believes that continued sluggish iPhone sales coupled with the impending worldwide rollout of 5G will leave Apple forced to "face [a] fundamental deterioration over the next 6 to 12 months".
Its true Apple hasn't cemented any plans to roll out a 5G enabled handset and the iPhone 11 lineup, due later this year isn't going to be able to access 5G networks and will be forced to use 4G LTE networks for the time being.
However, Apple surely understands that it needs to push innovation again to enjoy the lofty growth rates of years past. The Japanese Business Daily reported today that Apple is "aggressively testing" BOE Technology Group's (China) flexible OLED screens, which would mean the company is either wanting to partially move away from Samsung for its traditional OLED screens or it is indeed ramping up to enter the flexible screen game.
It would be par for the course for Apple to sit by and watch others attempt to be on the bleeding edge (see: Galaxy Fold debacle) while it perfects the application of the technology to a high level of polish.
For the time being Apple is under fire for a stagnant stable of products, which is why Rosenblatt issued a price target of $150, around 30% down from today's closing price of $212 per share.