BofA analyst sees consumers, even Apple customers, pulling back on tech spending

Bank of America Global Research analyst Wamsi Mohan sees consumers, even Apple’s high-end customers, pulling back on tech spending in the coming quarters.

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Daniel Howley for Yahoo Finance:

“The argument is being made that the high-end consumer is resilient, and hence Apple should also be commensurately resilient,” Mohan told Yahoo Finance Live. “The issue, really, that we see is that consumer spend is weakening, even within Apple’s own install base.”

Despite the fact that the broader economy is flailing, Apple posted impressive revenue numbers during Q3, beating analysts’ expectations and delivering record revenue for the quarter on the strength of its iPhone revenue in July.

In September, Apple released its iPhone 14 lineup, which has a higher starting price, $799, than the iPhone 13 lineup, which started at $699 iPhone thanks to the now-discontinued iPhone mini.

MacDailyNews Take: That’s quite the machination from Howley who performs some verbal gymnastics to arrive at his pretense. In reality, very few people, relatively, actually considered buying the iPhone 12 or 13 mini. It was a niche product. So niche that it no longer exists. Apple’s mainstream iPhone (iPhone 12, iPhone 13, iPhone 14) all sport exactly the same starting price, $799; unchanged for three generations.

“The App Store grew about 4 or 5 points in Q2. [It’s] going to be down 2% in Q3, and this is the install base of users catering specifically to Apple,” Mohan said. “So what’s very clear is that this is not just sort of some low-end consumer problem. We have a broader spending deceleration that’s happening across sort of the broader swath of the ecosystem.”

MacDailyNews Take: If true that the App Store will be down 2% in Q3 (we’ll wait for Apple’s actual Services number, thanks), then this is precisely where the type of consumer who’s most affected by an economic downturn would cut back; buying fewer apps or curtailing in-app purchases. These aren’t the Apple customers who buy a new iPhone every year. In fact, from all we’ve seen, Apple’s customers are spending more per iPhone, gravitating to iPhone 14 Pro and iPhone 14 Pro Max due to much clearer, much better differentiation above “regular” iPhone models. A stronger iPhone mix, meaning higher iPhone ASP, is not bad for Apple. It is good for Apple.

Apple’s sales typically peak in Q4 as consumers buy up everything from iPhones and Apple Watches to iPads and Macs in time for the holidays. And that’s not going to change this year. After that, though, is when Mohan says the company could start feeling the squeeze.

“As you look into March and June, we think the real problems start to emerge then in terms of just the weakening and the rate and pace of change in consumer appetite for electronics,” Mohan explained.

MacDailyNews Take: We’ve been covering Apple in these pages for over 20 years and have seen Apple perform through multiple recessions.

It’s the non-Apple tech companies that are most at risk during a consumer spending slowdown since their consumers have less, and/or are less willing, to spend. Apple will be just fine, even in a recession. And, during any stock price declines, Apple’s massive buyback plan will be even more effective in retiring shares and providing support for shareholders.

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[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]


  1. The economy and consumers were slammed hard by the COVID pandemic, first in 2020 (when all of the prognosticators were liberally throwing around the possibility of an economic depression) and continuing on well into 2021. But the Apple proved resilient, continuing to set new quarterly records, because the products it makes are indispensable. Even in the increasing uncertainty of the last year we’ve seen Apple gaining market share from cheaper (less secure, privacy-compromising) Android options. These BofA downgrades reek of short covering. I’m continuing to be long on Apple.

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