Cowen Downgrades Apple, Highlights Several Concerns Following Q3 Results

In a report published Wednesday, Cowen & Co analyst Timothy Arcuri downgraded the rating on

from Outperform to Market Perform, while reducing the price target from $140 to $130, after the company reported its 3Q results. Lower-than-expected iPhone sales in the latest quarter, mounting concerns related to China demand and a decline in iPhone builds for the first time since its launch could have a negative impact on Apple's future stock performance, analyst Timothy Arcuri said. Although new service offerings by the company are expected to eventually result in meaningful hardware sales, iPhone units remain the key driver for the stock in the near to medium term, Arcuri added. In the report Cowen & Co noted, "While mgmt. commentary sought to re-assure, iPhone units were light even adjusting for channel inventory. Normally, this would not concern us but evidence of a widespread demand reset from China is mounting." "On that front, our field work continues to suggest that builds are tracking down cycle/cycle for the first time in a new iPhone launch and, while we are very bullish about AAPL's ability to tap into a much broader and deeper demand opportunity for a price-reduced 6/6+ than prior "old" models, this is a different narrative," the report added. Apple reported in-line FQ315 revenue sand EPS of $49.6 billion and $1.85, respectively. The sale of 47.5 million iPhone units during the quarter was short of expectations of over 50 million units. Arcuri believes that Apple Watch would not contribute more than 10 percent of the company's total revenues before F2017. The EPS estimate for F2016 has been reduced from $9.75 to $9.60.