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BofA analysts on Apple downgrade: 'Risks should not be ignored'

AAPL) inches closer to a $2 trillion market-cap valuation, a BofA analyst just downgraded the stock to Neutral, noting “risks should not be ignored.”

quarterly results which smashed Wall Street expectations. Shares have recently been trading at all-time highs.

“We are downgrading shares of AAPL to Neutral as we view risk reward more balanced at these levels,” wrote Wamsi Mohan in a note to investors.

The downgrade is accompanied by a price target increase from $420 to $470, “which assumes low-single digit year over year revenue growth and flat margins.”

Apple shares were trading relatively flat on Wednesday, hovering around $437 after several sessions of back-to-back gains. Year-to-date the stock is up 49%.

^GSPC) in 10 years.

“Shares have experienced a rapid multiple expansion (5 multiple turns),” while calendar 2021 estimates have largely been unchanged, wrote the analyst.

Mohan sees risks to product gross margin pressure from a higher bill of material costs for the 5G iPhones along with “tough compares in 2021 from an unsustainable trajectory (30% growth) of high margin App Store growth.”

Apple CEO Tim Cook speaks via video conference during a House Judiciary subcommittee hearing on antitrust on Capitol Hill on Wednesday, July 29, 2020, in Washington. (Graeme Jennings/Pool via AP)

hit with questions about the dominance of the company’s App store.

Mohan highlights the potential risk of anti-trust regulation on the App Store and the possibility of “a higher tax rate in the event of a democratic win in the US elections” in November.

The analyst also cites “lower impact from share buybacks.”

Last week the tech giant announced a 4-1 stock split and reached all time highs as investors digested the earnings.

The analyst notes scenarios in which his team “could be wrong,” including a stronger-than -anticipated cycle from 5G iPhones, gross margin upside, and a weak dollar which could cause incremental upside.

the company said during its earnings call could be delayed by a few weeks.

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@ines_ferre” data-reactid=”58″>Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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