Avoid Apple stock as coronavirus uncertainties weigh on iPhone launch, Goldman Sachs says

• Investors should steer clear of Apple shares until coronavirus-related uncertainties subside and markets can better price future performance, Goldman Sachs said on Wednesday.
• The firm's analysts expect Apple to omit forward guidance from its upcoming quarterly report, leaving investors guessing as to whether its next-generation iPhone will arrive on time.
• A one-month delay for the iPhone's launch could fuel a 7% hit to revenue and a 6% decline in earnings over the fourth quarter, Goldman said.
• The bank also sees demand and average selling prices weakening through the end of 2020, describing Apple's recent rally as "unsustainable."
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Apple's rally to all-time highs won't last, and investors should steer clear of the stock until its outlook is clearer, Goldman Sachs said on Wednesday.

The tech giant is set to report quarterly earnings next Thursday, but Goldman's analysts are mainly focused on forward guidance — or a lack of it. The firm doesn't expect Apple to reveal an official forecast for its next quarter, leaving investors in the dark about whether its next iPhone will arrive on time this fall.

A one-month holdup could prompt a 7% hit to revenue and a 6% drop in earnings over the final quarter of 2020, Goldman said. While it's not the firm's baseline scenario, such a delay would worsen an already dire projection. Goldman's analysts see demand weakening through the end of 2020 and leading next-year profits to slide 16% below Wall Street's consensus.

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"On this basis we see Apple's recent stock performance and absolute trading level as unsustainable and would continue to recommend that investors avoid the stock," the team led by Rod Hall wrote in a note to clients.

Goldman maintained a "sell" rating on Apple shares. The firm bumped its price target to $299 from $268 in the Wednesday note, hinging the update on a higher S&P 500 price-earnings multiple. The new target still implies a 23% drop from Wednesday's close.

Results for the quarter that ended in June are likely to meet expectations, Goldman said, but the focus "remains on late 2020" for insight into Apple's demand recovery.

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Recent higher-income job cuts at companies and a still elevated unemployment rate suggest the coronavirus pandemic's drag on spending will last longer than expected, the analysts said. Even if unit demand swings higher, Goldman sees weakened average selling prices weighing on Apple's performance well into 2021.

Apple closed at $389.09 per share on Wednesday, up roughly 33% year-to-date.

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