Stock Market

Apple (NASDAQ:AAPL), the most valuable company on the planet, is off to a rough start this year. Shares fell more than 1% Thursday. The maker of iEverything has now slid 2% already in 2024. The stock fell on the last trading day of 2023 too, so it’s on a four-day losing streak.

What’s going on? After a nearly 50% surge last year, Wall Street is starting to wonder if the stock might be a little overheated. Analysts at Barclays and Piper Sandler downgraded Apple shares this week.

Piper Sandler Sours on Apple

Piper Sandler’s Harsh Kumar wrote in a report that Apple’s valuation is above its 5-year average. That’s a problem given that he is “concerned about handset inventories” and worried that growth rates may have “peaked” for iPhone sales. Apple generates more than half its revenue from the iPhone, so this is a major worry. Kumar also cited a weakening economic backdrop in China as a concern for Apple. And that’s an issue for the whole smartphone ecosystem. Kumar also downgraded leading mobile chip suppliers Skyworks Solutions (NASDAQ:SWKS) and Qorvo (NASDAQ:QRVO).

To be sure, jitters about valuations and the global economy are problems for the whole tech sector. Apple isn’t the only member of the Magnificent Seven taking a breather this week. Shares of the other six are all in the red this year, as is the Nasdaq. But Apple is souring investors with so much negative attention.  

Still, investors may want to consider buying the dip.

Apple, despite concerns about lackluster demand for the iPhone 15, is likely to report solid sales and earnings growth for this fiscal year and in 2025. And even though the valuation may be higher than its historical average, shares are still not too expensive compared to other tech stocks, trading at 25 times earnings estimates for its next fiscal year. It’s also worth noting that Apple continues to buy back stock and pay a healthy, growing dividend that yields about 0.5%. What’s more, Apple is sitting on a giant mountain of cash: $162.1 billion as of the end of September. Those are just some reasons that Warren Buffett loves the stock; it remains Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) largest holding.

And despite the two downgrades this week, most of Wall Street still adores Apple. 22 of the 31 sell-siders who cover the stock have it rated a “buy.”

The Bottom Line

Yes, the iPhone may be close to maturing. But Apple bulls are hoping that the company’s upcoming Vision Pro AR headset could be the next big thing for the company. Remember, Apple doubters have been consistently wrong about the stock over the past few decades. Skeptics used to write off Apple as a second-tier computer maker when Steve Jobs was still alive since Macs had a lower market share than PCs running Windows. But with the creation of the iPod, iTunes music store, iPhone, iPad, Apple Watch and subscription services like Apple Music, iCloud, and Apple TV+, the company has proven under Tim Cook to be more than a one-trick pony.

That’s why the company is worth nearly $3 trillion and could keep growing.

As of this writing, Paul R. La Monica did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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