Ongoing foreign exchange headwinds, Covid-19 disruptions and a drop in services revenue will continue to hit Apple in the near future, according to Bank of America. Citing these concerns, analyst Wamsi Mohan slashed the bank’s price target on the stock to $185 from $200 a share in a note to clients on Tuesday. He noted that investors continue to focus on how the technology behemoth will perform as it grapples with rising inflation. “We expect F3Q rev impact from COVID-related disruptions and industry-wide silicon shortages to come in at the low end of the guided $4-8bn range, however, better supply is partially offset by weaker demand in China, related to lockdowns,” Mohan said. According to Bank of America, these headwinds could total $5 to $6 billion in revenue in the September quarter, while the surging dollar could create a 5% and 7% year-over-year headwind in the fiscal third and fourth quarters, respectively. At the same time, Mohan revised future estimates for the company’s services revenue to reflect a slowdown in App store and Google licensing payments ahead. Revenue estimates from the bank fall slightly below consensus expectations for the fiscal fourth quarter. Earlier this year, Apple’s China suppliers shuttered operations as the country grappled with a Covid-19 outbreak. Weaker demand stemming from these lockdowns could partially offset improving supply, Mohan wrote. Shares of the iPhone maker have dropped about 14% this year amid a broader market sell-off, but the bank’s fresh price target implies a potential 21% upside from Monday’s close. The stock has risen about 12% this month. “Given the recent rally in shares, we would not be surprised to see a transitory pullback on a weaker guide but we reiterate Buy on upcoming product cycles, long-term growth in Services, opportunity to monetize the installed base, & strong capital returns,” Mohan said. — CNBC’s Michael Bloom contributed reporting
