Apple's softer iPhone demand outside US worries Goldman

On top of reports that Apple is cutting orders from suppliers due to deteriorating iPhone demand, Goldman Sachs saw several reasons to cut its target price for the tech titan.

Goldman, which kept its 'neutral' rating but trimmed its 12-month price target to $182 from $209, observed that softer demand for Apple’s products in China and other emerging markets the balance of price versus features in the new iPhone XR "may not have been well-received by users outside of the US".

There is a "material risk" to Apple guidance for the quarter ending in March if current demand trends continue to play out, the bank's analysts said.

While in previous years a huge chunk of demand has been seen in the two-week period beginning a week before Christmas day, "it is possible that things change though we do not believe this is likely".

With the shares closing Monday at $185.86, this puts them on a p/e ratio of 13.9 time Goldman's recently reduced full year earnings per share estimate of $13.40, roughly in line with the company’s last three years average, so the analysts adjusted their target to produce a multiple "more in the middle" of the three year trading range.

"Our estimates remain at the lower end of Apple’s guidance range at this point as we believe the company likely included this more negative scenario in its provided range."

While an upturn in iPhone demand is a key "upside risk", along with a better than expected iPhone mix, significantly outsized buybacks and meaningful dividend increase, there are also downside risks of further weakening in iPhone demand and pressure on gross margins.