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Reality Check for Apple Stock (NASDAQ:AAPL) Reality Check: Apple Stock (NASDAQ:AAPL)

Apple, a prominent member of the “Magnificent Seven,” is facing a reality check on the first trading day of 2024. The neutral sentiment on AAPL stock sends an urgent message to Apple’s perma-bulls: high-flying stocks generally need to correct or consolidate before the next leg up.

Apple, known for its iconic smartphones, tech gadgets, and various services including streaming, holds a staggering $2.88 trillion market capitalization, surpassing all other U.S. companies. However, it’s essential to recognize that no company is immune to market dynamics, and even AAPL stock witnessed a decline on the initial trading day of 2024, marking a potential shift in the stock’s trajectory.

Apple Stock: Signs of Exhaustion

If you were to look up “exhaustion” in the dictionary, you might find a picture of Apple stock’s one-year price chart. Though said in jest, the profound truth lies in the fact that investing in Apple at this juncture presents a considerable downside risk. Major resistance at approximately $200 in July and December, coupled with a relentless rally in the first half of 2023, indicates a pressing necessity for AAPL stock to take a significant breather.

With Apple’s remarkable 52% gain last year, the stock exhibits an apparent imbalance, with more potential for downside than upside. Furthermore, the value-focused investors’ concerns are justified as Apple’s trailing 12-month price-to-sales (P/S) ratio stands at nearly 8x, considerably higher than the sector median P/S ratio of slightly above 3x.

Soft iPhone Sales in China: Reality or Fiction?

Amidst the “magnificent” rally of AAPL stock, a vocal Apple optimist, Dan Ives of Wedbush, dismisses concerns surrounding Apple’s soft iPhone sales in China. Despite challenges posed by loyal customers to China-based smartphone brands, particularly Huawei, Ives minimizes the impact. He labels the “growing noise and Huawei competition in China” as a “great fictional story” concocted by the bears, reiterating his Outperform rating on AAPL stock with a Street-high $250 price target. However, time alone will unfold the veracity of Ives’ vision, given that Apple’s issues in China cannot be hastily disregarded.

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Apple Stock: Emergence of a Bear

In a rare break from the typical praise, analyst Tim Long of Barclays downgraded AAPL stock from a Hold to a Sell rating, accompanied by a lowered price target from $161 to $160. Citing the “lackluster” performance of Apple’s iPhone 15, Long’s caution rings particularly potent, underscoring the criticality of Apple’s smartphone segment. Additionally, Long expresses apprehensions about Apple’s overextended valuation, cautioning that “the continued period of weak results coupled with multiple expansion is not sustainable.”

Is Apple Stock a Buy, According to Analysts?

Based on Analyst ratings in the past three months, AAPL comes in as a Moderate Buy with 23 Buys, seven Holds, and one Sell rating. The average Apple stock price target stands at $203.04, implying a 10.2% upside potential.

For investors contemplating AAPL stock, considering the most profitable analyst covering the stock (on a one-year timeframe) – with an average return of 47.31% per rating and a 93% success rate – could provide valuable insights.

Conclusion: Evaluate Your Position on Apple Stock

Apple, undeniably a technology gadget juggernaut, continues to wield significant influence, and expensive stocks can indeed become pricier. However, a pragmatic evaluation of Apple’s valuation, alongside heeding the warnings expressed by analysts, is paramount. While Apple’s long-term growth prospects remain robust, a neutral stance is prudent given the stock’s current pricing. Despite its enduring importance, investors must carefully consider the existing dynamics before making an informed decision.