Apple stock received a rare downgrade to 'Sell' from an analyst on Tuesday, highlighting concerns about the premium valuation and negative headlines surrounding the company in recent months. MoffettNathanson downgraded Apple from 'Neutral' to 'Sell' and set a price target of $188, indicating a potential downside of 22% from current levels.
Out of the more than 60 analysts covering Apple on Wall Street, only four have issued 'sell' ratings. Despite the downgrade, Apple shares only traded down about 1% on Tuesday, closing at $242.43.
According to senior analyst Craig Moffett, Apple is still considered a "truly great company," but the stock price has risen to unwarranted levels while facing a slew of negative news. Moffett pointed to issues such as a Federal judge ruling that Alphabet's $25 billion annual payments to Apple for Google's default search position on the iPhone are illegal, weak iPhone sales in China, and underwhelming performance of the Vision Pro headset.
Moffett also expressed concern about lackluster sales of the iPhone 16, despite new AI software updates being released. He believes that the current valuation of Apple stock is near historical extremes and is one of the most expensive among the Magnificent Seven stocks, even though its growth rate has been the slowest.
Overall, Moffett's analysis suggests that the current setup for Apple stock may not offer investors a favorable risk/reward profile. While acknowledging the company's strengths, Moffett believes that the market has pushed the stock price higher despite growing risks and challenges for Apple.