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Shares of Apple (AAPL) rallied to a record high last Friday and are up +49% this year. Apple, the world’s largest stock, is the first company to exceed $3 trillion in market value. However, Apple’s share price is nearly +3% above the average analyst price target, raising concerns the stock may be overbought in the near term.
Despite the surge in Apple to a record high, most analysts are less bullish on the stock than some of its peers. Just 68% of the firms tracked by Bloomberg recommend buying Apple, compared with at least 85% for Alphabet (GOOGL), Amazon.com (AMZN), and Microsoft (MSFT). Also, Apple’s consensus rating, a proxy for its ratio of buy, hold, and sell ratings, is near its lowest since November 2020.
The recent rally in Apple has pushed the stock’s 14-day relative strength index to its most overbought level since December 2021. In addition, Apple’s valuation is becoming elevated, as it trades at 30.2 times its estimated earnings for the next 12 months. That’s above its 10-year average and is a premium to the Nasdaq 100 Stock index ($IUXX) (QQQ).
Apple’s elevated valuation is more of a reflection of its balance-sheet strength, along with its buybacks and dividends, than it is of immediate growth prospects. Apple’s share price is down modestly today after the Financial Times reported that the company is cutting production for its Vision Pro headset because manufacturers are struggling with its complex design. According to the report, Apple is preparing to make fewer than 400,000 units of the $3,499 headset in 2024, down sharply from a sales target of 1 million units.
Even with Apple’s overbought status and elevated valuation, some analysts say the company’s ability to expand margins is underestimated. Last Thursday, Citigroup said Apple has room to rally another 30% from current levels, driven by a shift toward higher-end iPhones and further market share gains in China and India. Also, Oanda said, “Apple’s outlook remains solid given their balance sheet and further revenue projects, but these latest gains might be more of a defensive switch for traders who see a U.S. economy that is recession bound.”
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
