Apple gets second downgrade this week as Piper Sandler cites iPhone sales and valuation

Another Wall Street firm is moving to the sidelines on shares of Apple , the second time in three days the Tim Cook led company has been cut. Piper Sandler downgraded the iPhone maker to neutral from overweight due to valuation concerns and a tough outlook for the handset market. "We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales," wrote Harsh Kumar in a note Thursday.

AAPL YTD mountain Apple's stock is down 4% in 2024 The move from Piper Sandler marks the second downgrade of Apple this week. Shares sold off nearly 4% on Tuesday after Barclays moved to an underweight rating on the stock, citing "lackluster" iPhone 15 sales and weak volumes in other key categories as well.

The stock is down less than 1% in premarket trading Thursday and has already fallen more than 4% in only two trading days in 2024 after soaring 48% in 2023. To be sure, Kumar anticipates a recovery in the handset market after a slowdown in 2023, but that's unlikely to arrive until the second half of 2024.

Weakness in China may also put pressure on the smartphone business. Handsets, he noted, account for more than half of the company's total revenues. Piper also downgraded key components suppliers Skyworks Solutions and Qorvo , similarly citing handset concerns. Troubles with Apple's smart watch, pitting it in an i ntellectual property battle with medical technology company Masimo , could also pose near term headwinds.

At the same time, Apple's valuation currently sits above its five year historical average, trading at 29 times the next 12 months estimated earnings, against an average of 24 times. "Difficult comps from 2023 paired with constant currency headwinds are expected to continue in 1H24 with interest rates remaining elevated," the Piper analyst added.

— CNBC's Michael Bloom contributed reporting.