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Recession talk is everywhere, as the global economy deals with escalating prices, rising interest rates and geopolitical uncertainty.
And with such problems soon showing signs of abating, a report from Goldman Sachs says companies like Apple (NASDAQ:AAPL), HP Enterprise (NYSE:HPE) and Corsair Gaming (NASDAQ:CRSR) has some of the highest downside risks in the event of an economic downturn.
A group of analysts, led by Rod Hall, noted that Apple (AAPL) the stock could drop more than 40% in a bear scenario. Such a situation would include the gross domestic product of the United States [GDP] contracts between 4% and 5%, or similar to those seen in 2008 and 2009.
Consider the worst case for Apple (AAPL), Hall’s team says the company’s 2023 revenue estimates could be cut by up to 15% from the base case, and Apple (AAPL) could see its earnings fall to $4.47 a share, or 33% less than the consensus forecast.
Additionally, the company has lowered its revenue forecast at every Apple (AAPL) business segment excluding Mac, as it believes that Apple (AAPL) computer will likely see “demand continues to be good and increase market share.”
Hall, who has a neutral review of Apple (AAPL) shares, which recently lowered the tech giant’s price target to $130 a share from $157. Hall noted that weaker-than-expected iPhone sales, coupled with pressure on gross margins and large, weakening acquisitions could accelerate downside risks further.
However, Apple (AAPL) could still see better-than-expected iPhone demand, coupled with continued growth in its services segment and the continuation of “significantly outsized” stock buybacks that help support earnings on per share.
For HP Enterprise (HPE), Goldman said a potential recession might not be as bad for it as it is for some other companies, but it depends on how bad the IT demand environment becomes.
In a pinch, Hewlett Packard Enterprise (HPE) could see its estimated 2023 revenue drop by as much as 12% and gross margin down 2% as inflation stagnates.
Goldman recently lowered its price target on Hewlett Packard Enterprise (HPE) to $12 a share from $13 due to concerns about higher operating costs and lower revenue. However, the company notes that there may be potential for a better spending environment, cutting costs more than expected and continuing to monetize the H3C team, which powers the market. China.
Glance over everything that’s picking up and inflation and constant fears of a recession. In addition to the fact that inflation in the US is at its highest level since 1981 and now has a more than 30 percent chance of a recession, growth forecasts continue to decline, Goldman said.
And while the company doesn’t expect a full-blown crisis like in 2008 and 2009, investors have begun to prepare for such a scenario, with consumer electronics having “a downside risk.” for fundamentals if a more severe decline in demand” eventually materializes.
With Corsair (CRSR), which makes gaming peripherals and became a big stock last year, Goldman Sachs sees the potential for a 15% cut from its 2023 revenue estimate if a recession hits.
In contrast, companies like Ciena (CIEN), Qualcomm (QCOM), Arista Networks (NET) and Pure Archive (PSTG) has the least downside risk among larger-cap tech stocks, Goldman added.
Apple (AAPL) recently lowered the trade-in value for some versions of iPhone, iPad, Mac, and Apple Watch, when the tech giant is ready to refresh the product later this year.
