KeyBanc Capital Markets cut its rating on Apple to sector weight from overweight late Tuesday, citing the shares’ high valuation as well as an expectation for soft growth in the United States. “We see the stock trading at rich multiples and expect trends in key markets such as the U.S. to remain soft, which puts pressure on Int’l for growth,” wrote analyst Brandon Nispel. He said the stock is trading “near [all-time high] multiples and a large premium to the Nasdaq vs. history.” Nispel noted that Apple trades at 7.1 times premium to the Nasdaq based on enterprise value to earnings before interest, taxes, depreciation and amortization. The stock trades at 2.7 times premium to the Nasdaq on an enterprise value to free cash flow basis, the analyst added. “We believe in order to justify upside to AAPL shares, peak valuations need to be applied or its growth profile needs to inflect higher,” Nispel wrote. KeyBanc also anticipates soft growth in the Americas region, noting that about 37% of Apple’s revenue comes from the U.S. and that sales there are “likely to struggle.” “We expect the U.S. to experience its fourth consecutive y/y decline in F4Q23, potentially carrying into F124 for several reasons,” Nispel said. He is forecasting softness from U.S. carriers as phone upgrade rates are trending toward all-time lows, as well as iPhone promotions being weighted toward more costly phone plans. Finally, the firm anticipates fiscal 2024 revenue growth of 3.5% compared to a consensus of more than 6%. Nispel anticipates iPhone revenue will be down 2.2% in 2023 and up 2.1% in 2024. “We also expect margins to improve at a slower pace in the next couple of years,” the analyst added. Apple shares are up nearly 33% year to date. — CNBC’s Michael Bloom contributed reporting.
