A Wall Street firm turned bearish on Apple stock on Friday, downgrading shares to sell from neutral.
Lightshed Partners made the move based on a more conservative outlook for iPhone sales and moderating growth expectations for services revenue. It set a price target on Apple stock of 120.
On the stock market today, Apple stock dropped 1.4% to close at 148.50.
In a blog post, Lightshed analysts Walter Piecyk and Joe Galone explained the reasons for their downgrade.
They see replacement cycles for iPhones continuing to lengthen into 2024. Factors driving the trend include economic weakness and possible reduced smartphone subsidies from wireless carriers. Also, wireless operators have been extending phone payment plans to three years from two.
Apple Stock Downgrade Follows Bullish Reports
"We believe Apple's revenue miss last quarter was primarily driven by weaker demand from the lengthening replacement cycle and not supply issues, the popular narrative," the analysts said.
Plus, there is little consumer interest in 5G wireless, they said.
"A 5G killer app may very well emerge, but it's hard to believe that will drive phone sales during our investment horizon," Piecyk and Galone said.
Meanwhile, the Lightshed analysts think consensus estimates on services growth at Apple are too high. They noted that Apple services revenue growth has decelerated over the past year.
Lightshed has taken a contrarian position on Apple stock. In the past week, investment banks Morgan Stanley, Goldman Sachs and Wedbush Securities have raised their price targets on Apple.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.