Wall Streets analysts have been becoming increasingly concerned ever since Apple shares reached $176 a couple of weeks ago – a historical record for the firm’s stock price. Yesterday, quite a few of them cautioned investors that even the strong sales of new iPhones and the planned tax reduction for companies might simply not be sufficient to drive the company’s share price notably higher.
After these comments went public, Apple’s share price dropped marginally to $174.63, giving the firm a share market valuation of nearly $900bn.
Although iPhone sales, including the iPhone X, are growing, it is not as fast as Wall Street thought it would be. Analysts now expect a total sales growth of 10% this year instead of the 12% predicted before.
Taking into account that Apple stocks have already gone up 51% so far this year, investors should start to become wary Jeffrey Kvaal said in a report yesterday, adding that “The risk/reward on the stock is less compelling than it has been.”
He warned that Apple stock has often “traded in a series of peaks and troughs”.
Apple might also not benefit as much as investors initially expected from the proposed US corporate tax reforms. Toni Sacconaghi from Bernstein Research said that reducing the maximum corporate tax rate to 20% and permitting firms to repatriate profits earned outside the country will improve Apple’s EPS, but because of the way it has been managing its tax liability the benefits might not be as significant as one would expect.
Sacconaghi concluded on a sober note: “Much of this benefit is solely on an accounting basis, as the company doesn’t actually pay the cash taxes that it has been accruing on its offshore earnings—but the optical impact of this dramatic increase in EPS could be significant in itself.”
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