Apple's flawless idea lies in the weak prospects for growth and the continuing risks of demand for key products in China.
For the current fiscal year, consensus revenues and EPS are expected to fall between 3% and 4% while short-term margin pressures are also observed. Bulls adhere to the growth story in the services segment, including the launch of Apple TV +, but it is important to recall that iPhone remains the most important product of the company and accounts for over 60% of total revenue.
We see risks related to concerns about the upcoming next generation iPhone. If rumors are believed, expectations for the newest device are rather muted, as the company will not make a significant upgrade compared to what is currently being offered. To be honest, we can be sure that this will be the fastest handset with the best camera, but this is no longer enough to meet the needs of consumers. The big elephant in the room is the potential lack of 5G, but the Qualcomm vendor does not seem to be ready to produce the necessary quantities this year. This in itself is a major reason many of the potential buyers of the iPhone 11 miss the update of their phone this year.
The conclusion here is that there are a lot of risks that weigh on future company development forecasts. Our belief is that the market takes for granted the risk of a potential "disaster scenario" where this new iPhone is not performing well, which would bring pressure to bear on the stock. Apple can not afford to lag and lower expectations to itself at this point.
Separately, the prospect of the Chinese market is also unclear. In addition to trade shortfall, China's cyclical slowdown, including weaker retail sales in 2019, put further pressure on Apple's sales on the market. Nothing about the company's prospect is impressive and does not imply the formation of a new peak this year.
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