Raymond James: We're Downgrading Apple

Raymond James downgraded Apple Inc. AAPL Friday from Outperform to Market Perform and did not maintain any price target.

Analyst Tavis C. McCourt believed that FY2016 comps “will be quite difficult, while early reviews on Apple Watch suggest it will fall far short of the ‘insanely great’ benchmark, at least in this first iteration.”

The analyst did raise revenue and EPS estimates “due to data points that suggest significant iPhone strength in China, as well as an assumption of stronger buyback activity,” however, it was not enough to maintain a bullish rating.

The quarterly data points suggested that iPhone demand resulted in 60 million units sold in March. Additionally, assumed share buy backs would lift EPS.

Looking ahead, McCourt continued to forecast fewer iPhone units in FY2016 vs. FY2015 with 215 million vs. 226 million units.

“Whether investors overreact to the iPhone slowdown in this cycle as they did in the iPhone 5 cycle is uncertain, but we believe the most likely scenario is a range-bound stock (rather than a meaningful pullback), as there appear to be few obvious investment alternatives currently given the strong U.S. dollar and slowing global economy, which is impacting growth at nearly every large global corporation,” according to McCourt.

From a valuation perspective McCourt viewed a parity multiple to the S&P 500's 15.8x 2016E “as a reasonable yardstick for fair value” when assessing Apple’s shares and that current levels suggested the stock was “trading in line with this valuation yardstick.”

The firm’s FY2015/FY2016 EPS estimates were raised from $8.13/$7.92 to $8.49/$8.01 while the FY2017 EPS was maintained at $8.81.

Apple recently traded at $125.55, down 0.8 percent.