Goldman Predicts More Pain For Apple, Likens It To Nokia

Apple‘s lowered revenue guidance for the first quarter may not be enough, warned Wall Street firm Goldman Sachs, which said on Thursday (Jan. 3) that the Cupertino, California iPhone maker will likely have to lower its forecast for the full year.

According to a report in CNBC, citing a research note that Analyst Rod Hall sent to clients, the analyst warned that shares of Apple, which are under pressure in trading, can fall further. “We see the potential for further downside to FY19 numbers depending on the trajectory of Chinese demand in early 2019,” Hall wrote in the research note.

For its first quarter, Apple warned revenue would come in at $84 billion, which is lower than its previous guidance for revenue of between $89 billion and $93 billion. Analysts had been looking for revenue of $91.3 billion for the first quarter, noted CNBC, citing estimates from FactSet. Apple pointed to a slowing economy in China during the second half of 2018 for the revised revenue guidance.

As a result of the revenue warning, which Apple issued after the close of trading Wednesday (Jan. 2), Hall cut Goldman’s 12-month forecast for the stock to $140 from $182 a share and reduced his full-year revenue estimate for 2019 to $253 billion, which is 6 percent lower than his previous forecast. As for his full-year EPS estimate, the analyst lowered it 10 percent to $11.66 a share.

“We have been flagging China demand issues since late September, and Apple’s guidance cut confirms our view. We do not expect the situation to get better in March and would remain cautious on the region,” the analyst said in the research note. He went on to compare Apple to Nokia, the once leading handset maker that exited the smartphone market after relying on upgrades to keep the business going. “Nokia saw rapid expansion of replacement rates in late 2007 that was well beyond what any linear forecast would have implied,” Hall said. “Beyond China, we don’t see strong evidence of a consumer slowdown heading into 2019, but we just flag to investors that we believe Apple’s replacement rates are likely much more sensitive to the macro now that the company is approaching maximum market penetration for the iPhone.”