HSBC analyst Erwan Rambourg thinks that Apple’s hardware growth is “broadly over for now,” as iPhone sales stall.
Rambourg is the latest analyst to downgrade Apple’s price target. However, he doesn’t think investors should sell up just yet. “[It’s] too late to sell, too early to buy,” the analyst advised.
What’s the road forward?
Apple shares fell 2.1 percent in premarket trading after Rambourg’s analysis. Apple’s valuation has fallen 19 percent in the past three months, as explained in this article. Over the past month alone, AAPL has fallen 11 percent. The Dow Jones Industrial Average has risen 2.2 percent during that time period.
However, Rambourg doesn’t think that Apple is doomed. He thinks, instead, that the company needs to focus on innovating to ensure that its user base doesn’t shrink.
He then lays out three possible strategies for it to do so. One of these is geographical expansion, not just of the iPhone but of other services like Apple Pay. With Apple’s Services division growing rapidly, this could help plug some of the hole left by slowing iPhone sales.
Secondly, Rambourg suggests that Apple focus on breakthrough technologies for the iPhone that would prompt users to upgrade. This might be applications such as augmented reality, which would serve as the kind of “killer apps” that make users throw down their money for new models.
Thirdly, he suggests Apple focus on “pure innovation” in new areas such as autonomous cars, health applications, and AR glasses.
None of these three are particularly original suggestions, of course. Moving into new markets for existing products, or creating entirely new products, is how virtually all growth is achieved — and Apple’s will be no different. But it does speak to a macro story that’s playing out with more and more investors’ comments about Apple: that it must look beyond the iPhone for its future growth.
Rambourg lowered his Apple price target from $205 to $200. At time of writing, AAPL is trading at $181.28.