Facing the AI-driven iPhone upgrade cycle challenge, MoffettNathanson covers Apple for the first time and gives a "Neutral" rating
MoffettNathanson initiates coverage on Apple Inc. with a neutral rating and a target price of $211. Analysts point out that the AI-driven iPhone upgrade cycle faces challenges, including regulatory and geopolitical factors. In addition, the current high interest rates require higher growth rates to maintain a similar P/E ratio. Google's antitrust lawsuit poses potential risks to Apple. Despite analysts' forecasts generally exceeding market expectations, Apple's P/E ratio includes optimistic assumptions. Seeking Alpha rates it as "hold", while Wall Street analysts are generally optimistic
According to the Zhitong Finance and Economics APP, MoffettNathanson, the research department under SVB Financial Group, has initiated coverage on Apple (AAPL.US) for the first time, giving it a neutral rating with a target price of $211. Analysts compared the AI-driven iPhone upgrade cycle foundation with the general conditions at the beginning of the 5G upgrade cycle. Several reasons were given to explain why the upgrade cycle will face challenges, with the main one being regulatory barriers outside the United States combined with geopolitical factors that may restrict the launch and adoption of Apple's AI.
However, Apple's current valuation is already far above the valuation of the 5G cycle. In addition, there is a less favorable comparison for the 5G upgrade cycle in 2021/22. Analysts point out that current interest rates are higher, meaning that this time the growth rate must be much higher to maintain a similar P/E ratio level.
Analysts also emphasized regulatory factors, noting that these considerations should currently be seen primarily as risks rather than fundamental scenario predictions, but should not be ignored in any case. One significant risk is the U.S. government's antitrust lawsuit against Google, as Google has paid Apple significant fees annually to become the default search engine on its devices, and the antitrust lawsuit poses a real threat to this arrangement.
Analysts added that in many cases, their forecasts are higher than consensus expectations. However, the consensus expectations of the sell-side do not fully reflect the optimism implied by Apple's current P/E ratio. Apple's stock price already incorporates an aggressive terminal growth assumption, which seems much more generous than the sell-side forecasts.
In Seeking Alpha's quantitative rating system, Apple is rated as "hold," consistently outperforming the market. Meanwhile, the average rating from Seeking Alpha authors is also "hold," but Wall Street analysts have a more positive average rating of "buy."