According to Goldman Sachs, these two home tech names could be hit the most in the event of a deep recession. Shares of Apple and Hewlett Packard Enterprise are both at the highest risk in a bear event, according to a note Tuesday from the investment bank. Goldman Sachs, which is now forecasting a slight slowdown, expects weakening consumer sentiment and corporate spending to continue to undercut the value of two tech stocks – even both down nearly 20% in the year. this year. “We’ll show that our consumer electronics coverage generally has the most downside risk to fundamentals if demand worsens, compared to our base case.” come true, but our data points at the time of this writing are still consistent with the same shallow decline as our economists’ current forecast,” reads the note. A major downturn for Apple could cause its 2023 revenue and earnings estimates to fall 22% and 33% respectively from consensus estimates, the note read. Goldman Sachs assumes a 15% revenue cut through 2023 in its bear case. The company, which has a neutral rating on Apple, also lowered its 12-month price target to $130 from $157. Shares of Apple were recently up less than 1% at around $142. “We lower our revenue forecasts in all segments where we believe Mac can continue to see good demand and increased market share,” the note read. Meanwhile, a bear scenario for Hewlett Packard could mean a 38% drop from consensus estimates, according to the note. Goldman Sachs assumes a 12% revenue cut through 2023 in its bear scenario. Shares of Hewlett Packard fell about 1.5% in Wednesday’s trading, putting it at around $12.63. The downturn will hit the two companies as consumer sentiment slumps and more people shift to services from goods during the post-pandemic recovery, according to the note. Goldman Sachs expects that high-end consumers, who have been resilient so far, will also be affected as this year continues. Meanwhile, the company noted that spending is shifting to categories away from home, such as beauty and luggage, at retailers like Target. “We believe that even if high-end consumer sentiment in the US remains relatively stronger for longer than expected, this change in wallet proportions still means a downturn for big names. contact with our consumers,” the note reads. Currently, forecasts for PC and smartphone sales are declining, the note said. Goldman Sachs expects PC units to drop 24% year-over-year in 2023 in the bear case and 10% in 2023 in the base case. Meanwhile, smartphone shipments are expected to drop 8% year-on-year in 2023 in a deep recession scenario and increase 4% in its base case. The investment bank is weighing the impact of a deep recession on stocks as Wall Street continues to debate the timing and scale of the downturn. On Tuesday, the yield on the benchmark 10-year U.S. Treasury note fell below the 2-year yield, a reversal that many investors see as a warning sign that the economy could fall into recession.
