Mizhuo Jumps on the ‘Tech Wreck’ Bandwagon — Downgrades $AAPL

This downgrade is pure shit. Why even bother ‘downgrading’ a stock from a price target of $160 down to just $150? Why not do nothing at all and eat sandwiches, unless of course you’re a media whore trying to capitalize on the near term weakness in tech stocks. This is precisely what Mizhuo is doing this morning.

We are downgrading Apple to Neutral from Buy while adjusting our PT to $150 from $160. The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out. Our sensitivity work indicates bull case EPS of around $11 which, along with a cycle-peak multiple, indicates limited upside to the stock. Our LTVC work suggests more muted gains as well. As such, we move to the sidelines despite our expectations of a strong iPhone 8 cycle.

Still expect strong iPhone 8 cycle. We concur that the upcoming product cycle is likely to drive a strong holiday season following into early next year; however, we believe strength is anticipated and see very limited upside to estimates from here. A few things make us cautious on consensus FY18 numbers: 1) potential pull-in of demand creating tough comps in the following year; 2) growth driven primarily by replacements vs. net new customers, limiting expansion of installed base; 3) initial supply constraints due to complexities around product ramp; 4) potentially higher ASPs for high-end SKU driving demand elasticity; 5) risk to out-year gross margins.

Downgrading to Neutral from Buy; adjusting PT to $150 from $160. At 15x and 11x NTM EPS and FCF, the stock is trading near the upper-end of its recent valuation range and we believe it is tough to expect the multiple to expand. With limited upside to EPS or FCF estimates, we think the stock is fully valued.

Limited upside, yadda, yadda, yadda. The stock is down a whole 1.5% in the pre-market.