KeyBanc Maintains Cautious Stance on Apple Stock Amid Spending Decline

KeyBanc analysts have maintained a neutral rating on Apple Inc. stock, citing a 17% month-over-month decline in indexed spending data in April, which may signal a slowdown in consumer spending on electronics and have broader implications for the technology industry. The decline is attributed to factors such as decreasing iPhone upgrade rates, increasing competition in China, and pressures on hardware margins." This description focuses on the primary topic of Apple's stock rating and the decline in spending data, highlighting the main entity of Apple Inc. and the context of the technology industry. It also mentions the significant actions and implications of the decline, including potential effects on the broader industry. The objective details provided will help guide the AI in creating an accurate visual representation of the article's content.

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Nitish Verma
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KeyBanc Maintains Cautious Stance on Apple Stock Amid Spending Decline

KeyBanc Maintains Cautious Stance on Apple Stock Amid Spending Decline

KeyBanc analysts have maintained their Sector Weight rating on Apple Inc. (NASDAQ:AAPL) stock, citing a 17% month-over-month decline in indexed data in April. This decline aligns with the three-year average but falls below consensus estimates for the third quarter of fiscal year 2024 (Q3 FY24).

Why this matters: The decline in Apple's spending index could have broader implications for the technology industry, potentially signaling a slowdown in consumer spending on electronics. This could have a ripple effect on other tech companies and the overall economy.

The investment bank's decision is based on data from its Key First Look Data (KFLD), which tracks spending from over 1.8 million U.S. KeyBank credit and debit card customers, excluding international transactions. KFLD filters Apple purchases over $399, representing larger purchases, and measures indexed spending sequentially to assess seasonality.

"Coming off below-average results in March, these results are modestly disappointing," KeyBanc analysts said in a Tuesday note. They believe Apple's guidance implies iPhone sales will be down mid-single digits (MSD), despite easy comparisons created by new product introductions in Mac (March) and iPad (May).

KeyBanc's cautious outlook on Apple is driven by several factors, including the continued decline in U.S. iPhone upgrade rates, increasing competition in China, pressures on hardware margins, and questionable expectations for growth to rebound in 2025. The analysts also consider Apple's stock to be expensive, trading at around 20 times their adjusted 2025 EBITDA forecast, which is high both historically and compared to peers.

Despite the challenges, Apple's management has been proactive in returning value to shareholders, with a track record of raising its dividend for 12 consecutive years. The company's stock has also shown low price volatility, suggesting resilience in the face of market fluctuations. Apple's market capitalization currently stands at $2.88 trillion USD, with a P/E ratio of 28.98 and a gross profit margin of 45.59%.

As Apple navigates the dynamic landscape of the technology industry, investors and analysts will closely monitor the company's performance and strategic moves. While the recent decline in indexed spending and below-consensus estimates for Q3 FY24 raise concerns, Apple's strong brand, loyal customer base, and history of innovation continue to position it as a formidable player in the market.

Key Takeaways

  • KeyBanc maintains Sector Weight rating on Apple due to 17% MoM decline in indexed data.
  • Decline in Apple's spending index may signal slowdown in consumer electronics spending.
  • KeyBanc's cautious outlook driven by declining iPhone upgrade rates, competition, and margin pressures.
  • Apple's stock considered expensive, trading at 20x 2025 EBITDA forecast.
  • Apple's strong brand, loyal customer base, and innovation history remain positives.