Apple stock ($AAPL) has been having a rough time in post-earnings trading, even though the S&P 500 and the Dow Jones indices continue to climb.
But bearishness in the market has not been consistent with sell-side analysts’ opinions on the Cupertino company and its shares. The stock is still rated a strong buy, with a consensus upside potential of 23% (see below).
Today, the Apple Maven looks at the freshest insights from Wall Street experts, which have been published over the past few trading days.
The tone is “cautious optimism”
Wedbush’s Dan Ives continues to be the most upbeat Apple analyst. His price target of $185 per share is tied with Raymond James’ as the highest on the Street.
On Monday, May 3, Wedbush looked at the Apple vs. Epic Games ongoing legal battle. He compared the dispute to Game of Thrones, noting that the outcome could be two: (1) a crucial, policy-setting resolution on Big Tech antitrust or (2) an overhyped disappointment that leads nowhere.
Dan Ives believes that Apple will end up a winner, eventually putting to rest some of my own concerns on the matter. Here is his quote:
“Apple has successfully defended its App Store moat again and again with this time being no different in our opinion.”
Morgan Stanley’s Katy Huberty reiterated her buy rating the very next day, with a price target of $161. However, her narrative sounded a bit more bearish than bullish this time. The analyst scaled back on her short-term expectations for App Store sales, citing quicker-than-anticipated growth deceleration.
“We are now incorporating a slightly lower App Store net revenue growth rate in the near-term to account for softer-than-expected April 2021 App Store net revenue growth. App Store net revenue slowed faster than we had expected.”
Evercore ISI’s Amit Daryanani is even more hopeful about the upside in Apple stock, having a $175 price target on the shares. However, in addition to sharing concerns on the App Store, he also mentions tough iPhone comps leading to growth deceleration in Apple Care – as both tend to be correlated.
There are other reservations
Perhaps the most bearish of research notes to be published recently came from Goldman Sachs – the same shop that has just upgraded its rare sell rating on Apple stock to neutral. The investment bank’s warning sign applied not only to Apple, but to the whole FAAMG group: Facebook, Amazon, Microsoft and Alphabet.
The laundry list of Goldman’s concerns over Big Tech is long, even though the sell-side shop still sees the group as outperformers in a scenario of decelerating U.S. economic activity – think of the most recent jobs report that widely missed the mark, on May 7. Among the bearish arguments are:
- Antitrust intervention, which Goldman labeled “the greatest threat” to FAAMG;
- A possible increase in the corporate tax rate could lead to a 9% drop in FAAMG consensus EPS;
- A potential hike in capital gain taxes could result in a selloff in the 2020 winning stocks;
- Rising interest rates could put pressure on growth stock valuations, which are arguably rich.
Caution on Wall Street is evident, but analysts remain largely in favor of an investment in Apple stock. I recently asked Twitter for an opinion: what is the number one reason for investing in shares of the Cupertino company? Below are the answers.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)