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- Investors are getting ready for Apple's mid-September event as it is expected to unveil the iPhone 15.
- Along with a new iPhone, Goldman Sachs said it expects Apple to announce new Watch and AirPods Pro products.
- A lot is at stake for Apple investors, and these are the top five risks, according to Goldman Sachs.
With Apple sitting at a nearly $3 trillion market valuation, there's a lot at risk for investors ahead of the company's highly-anticipated September 12 iPhone event.
The largest company in the world is expected to unveil the iPhone 15, the Apple Watch Series 9, the Apple Watch Ultra 2, and a new version of its AirPods Pro, according to a Thursday note from Goldman Sachs.
Along with better cameras, improved battery life, and USB-C charging ports, Goldman expects slight price increases for most of Apple's new products when they hit the market in late September.
And while Goldman has a bullish view on Apple with a "Buy" rating and a $222 price target, representing potential upside of 18% from current levels, the bank still sees some big risks on the horizon for the company.
One investor who is probably paying attention to Apple's risks is Warren Buffett, as his Berkshire Hathaway owns a near $180-billion stake in the company, representing about half of its stock investment portfolio.
These are the five top risks Goldman Sachs is worried about for Apple and its investors, according to Goldman Sachs' Michael Ng.
1. Weakening consumer demand
"Apple's products and services are typically sold to consumers and any weakness in the macroeconomic environment could reduce demand for Apple products and services. Apple generated over 50% of its revenue from iPhones, which is highly dependent on purchases driven by upgrades. Lengthening replacement cycles due to macroeconomic headwinds, improved product durability, or lackluster product innovation could all negatively impact upgrade demand."
2. Supply chain disruption
"Although Apple's suppliers have a global footprint, the majority of final assembly occurs in China. Increased geopolitical tension may result in disruptions to global trade including through tariffs. While Apple has a robust supply chain network, it may rely on one or a few key suppliers for unique or hard-to-manufacture at scale parts."
3. Intensifying competition
"Apple competes across personal devices and a variety of services. Although Apple is the largest company and the most well resourced among its competitors, it is not the market leader in every single business line. For instance, in video streaming, it faces several key competitors that invest more heavily than Apple in content."
4. Regulatory risks
"Apple is subject to intense regulatory scrutiny in all the major markets that it operates in. Regulatory intervention could result in weakening Apple's competitive advantages if it is forced to make its proprietary products or services available for competitors to use."
5. Capital allocation
"Apple has a history of mergers and acquisitions, which has no guarantee of success. Apple also has a history of share repurchases, which could prove to be dilutive or come under deeper regulatory scrutiny."
Despite these risks, Ng pointed out that Apple's strong brand loyalty, evidenced by its massive installed base of more than 1 billion iPhone users, should help power continued revenue growth as the company expands its services offerings. And that should be enough to calm down investors about the company's recent slowdown in iPhone revenues.
"We believe that the market's focus on slower product revenue growth masks the strength of the Apple ecosystem and associated revenue durability & visibility. Apple's installed base growth, secular growth in services, and new product innovation should more than offset cyclical headwinds to product revenue," he said.