What’s New With Apple Stock?

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AAPL: Apple logo
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Apple stock (NASDAQ:AAPL) had a solid year so far rising by about 27% since early January, outperforming the Nasdaq-100 which remains up by about 20% year-to-date. Now, tech stocks in general have fared well this year, following a tough 2022, as cooling inflation and a slowing pace of interest rate hikes by the Federal Reserve led investors back to the beaten-down sector.

Some other factors have likely helped Apple stock recently. Apple is making deeper inroads into the financial services space, recently launching a “buy now, pay later” offering that enables Apple Pay users to split payments for purchases over several weeks without incurring interest or fees. Investors are looking ahead to potential new product launches from Apple. Apple is poised to launch a new mixed-reality headset sometime this year. Although the device is likely to be expensive, with volumes expected to be limited at launch, it would mark Apple’s first all-new product launch in almost seven years. The device could also give investors a sense of the company’s plans for computing beyond the smartphone and PC era. Moreover, Apple’s next-generation iPhone due this fall, presumably called the iPhone 15, is likely to feature more pronounced updates.  There are expectations that Apple will raise prices on the flagship variants of the device, after essentially keeping prices flat for six years.

So, is Apple stock still a buy following the big rally this year? We believe Apple stock is now fully priced. At the current market price of roughly $165 per share, Apple trades at almost 28x consensus FY’23 earnings, which we believe is a relatively high valuation for the company. Apple’s current earnings yields and its position as a safe-haven stock are looking less attractive, with the Federal funds rate standing at between 4.75% to 5.00% presently. Moreover, we have concerns regarding the slowdown in Apple’s services business after years of robust growth. Services revenue grew by just 6.4% in Q1 FY’23, compared to an average growth rate of over 20% each year over the last five years. This is negative for Apple, considering that services are typically Apple’s highest margin segment (over 70% gross margins compared to about 36% for hardware). We value Apple stock at about $160 per share, marginally below the current market price. See our analysis of Apple Valuation: Is AAPL Stock Expensive Or Cheap? for more details of what’s driving our valuation for Apple stock and how it compares to rivals.

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What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 AAPL Return 0% 27% 470%
 S&P 500 Return 0% 7% 84%
 Trefis Multi-Strategy Portfolio 0% 8% 241%

[1] Month-to-date and year-to-date as of 4/3/2023
[2] Cumulative total returns since the end of 2016

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