Goldman Sachs lowers Apple price target after raising it itself

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Three days before the quarterly results, the bank had significantly raised its price target for Apple. Following the earnings call, it is now partially withdrawing this target – and basing its remaining optimism on an offer that doesn't even exist in Germany.

On July 28, Goldman Sachs raised its price target for Apple from $340 to $370, just days before the release of the company's third-quarter results. Following Thursday evening's earnings call, the firm revised its target down to $360. The buy rating remains in place, and even after the revision, the target is still $20 higher than the level it had been in place since May. Nevertheless, the move is remarkable: rarely is an upward revision pulled back so quickly.

A short-lived increase

The trigger for the retreat is Apple's outlook. Because the company says it cannot meet demand in the current quarter, analysts expect the stock to trade lower than recently. Added to this is the expectation that growth in the services business will slow further, which Apple attributes primarily to weaker App Store revenue.

The rapid shift in sentiment is evident in the stock's performance that same week. On Tuesday, Apple reached a record high of $342.89, its market capitalization surpassing five trillion dollars for the first time – becoming only the second company in history, after Nvidia, to achieve this. By Friday, the stock had fallen to around $301. Compared to Thursday's closing price, this represents a drop of almost ten percent and a market value of approximately $470 billion that vanished in a single trading day. This brings the market capitalization back down to around $4.4 trillion, and Apple's position as the world's most valuable company is once again under threat.

Not the suppliers, but the demand

At the conference, Tim Cook repeatedly clarified the cause: it wasn't a problem with partners or suppliers, but rather exceptionally strong demand. Regarding memory prices, he spoke of a once-in-a-century surge and admitted that Apple had limited options for short-term countermeasures. The most affected area is the production of its own processors using state-of-the-art feature sizes, impacting iPhones, Macs, and iPads alike.

Goldman Sachs soberly states the practical consequence: Apple will miss out on revenue this quarter simply because it cannot manufacture enough devices. The company had already made clear how tight the situation is in its outlook for the September quarter.

The leasing program, which doesn't exist in this country

A key component of the optimistic side of this calculation is Apple Upgrade. The bank expects the program to cushion the drop in demand that higher device prices would otherwise trigger – those who pay monthly feel a surcharge of two or three hundred dollars significantly less than those buying outright.

For readers in Germany, however, there's a catch: Apple Upgrade is currently only available to customers in the US. In Germany, Austria, and Switzerland, there's no comparable offer from Apple itself. If you're facing a price increase here, your options are direct purchase, retail financing, or a mobile phone contract. The buffer that analysts factor in is therefore ineffective precisely in those markets where prices are already higher due to VAT and exchange rates.

The second growth argument is similar. Goldman Sachs expects the use of AI quotas to drive iCloud+ sales – however, Siri AI will not launch on iPhones and iPads in the EU for the time being. Switzerland is neither in the EU nor the EEA and is therefore not affected by this restriction.

Three cuts, not a single downgrade

What's striking about this week's picture is its uniformity. Morgan Stanley lowered its price target from $364 to $360, JP Morgan from $345 to $340, and Goldman Sachs from $370 to $360. All three firms cited the same combination of supply chain disruptions, storage costs, and a weaker service business as the reasons for the cuts. None of them altered their rating.

All price targets are significantly above the current level. Anyone who considers the bottlenecks to be temporary will inevitably arrive at this conclusion – the crucial assumption in all three models is the same and remains unproven.

The objection to the market reaction

Goldman Sachs also identifies the risks: weaker global demand for hardware and services, longer replacement cycles if customers retain their devices, a lack of incentives to switch, and growing competition in virtually every product category. The firm therefore expects the stock to trade below its previous levels in the near future.

The analysts' main objection, however, is directed at the market's perspective itself. The stock market focuses too closely on the growth of individual product lines and overlooks how closely Apple's devices, software, and services are intertwined. New hardware this fall - Mac, iPad, and possibly a Home Hub are expected - expands the base for services, and every additional user potentially contributes to the service business. Whether this chain holds up will not be decided by a quarterly forecast, but by the next two product cycles. (Image: Shutterstock / GreenTech)