Investment bank Jefferies on Friday cut its rating on Apple Inc (AAPL) stock to Underperform from Hold. As reasons for the downgrade, Jefferies cited its belief that the company’s guidance for the current quarter is overly bullish, along with the tech giant’s declining margins.
Jefferies placed a $170 price target on the name.
Overly Bullish Guidance
Apple Inc (AAPL) said that it expects its top line to increase by around 1% to 5% during the current quarter, compared with the same period a year earlier.
But according to Jefferies, the company’s outlook assumes that no tariffs will be levied by the Trump administration on India and Vietnam, while Chinese imports will only be taxed at a 20% rate. The investment bank believes that tariffs on these countries will likely end up being significantly higher over the longer term.
Further, the negative effects of tariffs on Apple Inc (AAPL)’s earnings are likely to increase over the longer term, Jefferies warned.
Declining Margins
The gross margin on Apple’s products fell 0.7 percentage points last quarter versus the same period a year earlier, Jefferies reported. According to the investment bank, declining gross margins are likely to put downward pressure on AAPL’s earnings going forward.
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This article is originally published at Insider Monkey
