Apple’s surge this year has the iPhone-maker on the verge of officially becoming the first company with a $3 trillion market value, but at least one metric is pointing to a pullback in the near-term.
(Bloomberg) — Apple’s surge this year has the iPhone-maker on the verge of officially becoming the first company with a $3 trillion market value, but at least one metric is pointing to a pullback in the near-term.
Already the world’s largest stock, Apple’s 48% rally this year has pushed it to a fresh record, adding nearly $1 trillion in value. But, that rapid resurgence has driven its shares about 2% above the average analyst price target, according to data compiled by Bloomberg.
Such a situation is rare for Apple, with the most recent occurrence coming more than 18 months ago, which also corresponds with the last time it made an attempt at breaking the $3 trillion level. While Apple breached the threshold on an intraday basis, it failed to close above it, and that peak marked the start of a downtrend that was exacerbated by high inflation and the Federal Reserve’s attempt to combat rising prices by raising interest rates.
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While Apple received a new bull call from Citigroup Inc. this week, with the firm writing that the stock could rise an additional 30%, the company is less beloved by analysts than its megacap peers. Just 68% of the firms tracked by Bloomberg recommend buying the stock, compared with at least 85% for Microsoft Corp., Alphabet Inc., and Amazon.com Inc. Furthermore, Apple’s consensus rating — a proxy for its ratio of buy, hold and sell ratings — is near its lowest since November 2020.
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Much of the relative caution reflects concerns over Apple’s valuation. While it screens well on some quality metrics, including its balance sheet and the durability of its earnings and revenue streams, it trades at 30 times estimated earnings for the next 12 months. That’s above its long-term average multiple, and it is also at a premium to the Nasdaq 100 Index.
Based on its 14-day relative strength index, Apple is at the most overbought level since August.
“Apple’s outlook remains solid given their balance sheet and future revenue projects, but these latest gains might be more of a defensive switch for traders who see a US economy that is recession bound,” said Ed Moya, senior market analyst at Oanda.
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