Rosenblatt cuts AAPL target again, citing worries over 'Services' growth and low iPad Pro sales

iPad Pro with Smart Keyboard Folio

Jun Zhang from Rosenblatt Securities claims to be seeing iPad Pro sales "weaker than we expected so far," which the analyst is blaming on the price of the device. Additionally, coupled with that, Zhang is expecting to see iPhone XR and iPhone XS production to "come down slightly" — but in comparison to what isn't clear.

In the longer term, Zhang believes that "Apple's pricing strategy [is] already affecting unit growth," but the analyst ins't expecting a change in strategy or pricing in the near-term.

Other reasons cited for a lowering of Apple's target price on Thursday are an overall weakness in the smartphone market prior to the wide adoption of 5G, a lack of iPhone shipment growth, and his prediction of poor Services revenue growth that he appears to be standing alone in making.

In fiscal year 2020, Zhang expects little revenue growth from Apple, with a whole-year revenue expectation of $270 billion, about 7 percent lower than consensus estimates.

As a result of all of these factors, Zhang has cut Rosenblatt's Apple stock target price to $165, predicting darker days ahead. However, his claims of low iPad Pro sales seem premature — and impossible to compare with actual figures — plus he is the only analyst predicting slow services growth.

Historically, Zhang has under-estimated not just Apple's actual unit sales, but also the contribution of Services to Apple's bottom line. He was part of the chorus claiming that the iPhone X sales were bad — which was proven wrong by Apple's actual sales numbers and repeated remarks by Apple that the iPhone X was the best-selling iPhone after release in 2017 and well into 2018.

Zhang's predictions is only the latest one that appear driven more by concerns that Apple will no longer report unit sales similarly to how its competitors report, more than any other factor, given that the smartphone market has been at least relatively flat for the last two years versus Apple's actual sales figures. However, Zhang's prediction for Rosenblatt is the first to prognosticate bad growth of Services revenue.

Apple is predicting a likely record-breaking holiday sales period, expecting between $88 billion and $92 billion for the holiday quarter. The 2017 holiday season resulted in $88.3 billion in revenue — a period that analysts badly underestimated iPhone X sales.