We recently published a list of 10 Stocks in Wall Street’s Watchlist. In this article, we are going to take a look at where Apple Inc (NASDAQ:AAPL) stands against other stocks in Wall Street’s watchlist.
Dan Niles, Niles Investment Management founder, in a latest program on CNBC reiterated his concerns about a slowdown in AI spending and said that major technology companies were already facing the impact of a downbeat trend in the industry before the tariff wars started:
“When the MAG 7 reported the December quarter or calendar Q4, six of the seven had their March revenue estimates already cut. So think about that for a second. But the thing is, when the Fed’s cutting like it was last year, nobody cares, right? If the stocks are going up, the charts look good. Why worry about fundamentals or valuations?,” Niles said. “Because the stocks are going higher. So looking forward, I expect all the estimates to come down yet again for the June quarter. When these companies report the March quarter, they were already having troubles when they reported the December quarter before all this tariff stuff kicked in.”
Niles said that companies were buying more ahead of the China tariffs because they expected that duties were coming from the US.
“You can just see that from the China export data already, where for China as a whole, in the month of March, exports were up 12.4%. People were expecting 4.6%. So that’s a massive beat there. And so you can already tell demand’s being pulled forward. So my thought was there was a payback period coming anyway.”
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Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Erik Woodring from Morgan Stanley explained in a latest program on CNBC the reasons behind his price target cut for Apple Inc (NASDAQ:AAPL). The analyst decreased his price target for the iPhone maker to $252 from $275.
“Apple has always traded on its own paradigm. I think as an Apple analyst and knowing this stock for 10 plus years, you really have to get the fundamentals right first and then valuation second. If we made a valuation argument over the last 10 years, we would have said it was expensive. And so that’s not to say you shouldn’t take into account valuation, but the point is more let’s understand where the numbers are going. Are we seeing growth accelerate or decelerate? Are they missing numbers or are they beating numbers? At the end of the day, we still do believe growth can accelerate, just not to the same degree that we had baked in.
And so yes, we are seeing some multiple contraction, rightfully so, as some of the predictability of the model that maybe we thought was embedded is not necessarily there. That’s not to say that the multiple can’t further if there’s more concerns or rate. In the event we had more confidence in the Apple intelligence rollout. And so again, it remains a very dynamic situation here. But to directly answer the question in the near term, it’s kind of the market movements combined with the Apple-specific risks or lack of predictability in Apple intelligence that is causing some of the wind to come.”
Woodring said that the delay in Siri update for AI is likely to cause a decrease in the number of expected iPhone upgrades. This prompted the analyst to revise his estimates for Apple.
Many analysts believe that just a few AI apps would not be enough to trigger a broader upgrade cycle for iPhone. Apple is dealing with currency headwinds as the stronger US dollar is expected to reduce top-line growth by 2.5% next quarter. For Q2 FY2025, management expects overall revenue to grow in the low to mid-single digits. Apple’s stock is trading at a premium valuation, with a price-to-earnings ratio of 39-40x, a price-to-free-cash-flow ratio of 33-34x, and a PEG ratio exceeding 3x. Upcoming quarters would be difficult for Apple and its current valuation is not justified.
Columbia Seligman Global Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:
“The fund maintained a position in Apple Inc. (NASDAQ:AAPL) throughout the quarter through the release of the company’s new iPhone 16 in September. Company leaders were excited about the release of the new model, as this is the first model that will feature enhanced AI capabilities through the Apple Intelligence features. Sales for the first few weeks in October and November trailed behind year over year sales from the iPhone 15, as availability of Apple Intelligence was not compatible with all iPhone models. Apple announced a partnership with OpenAI that has allowed the integration of ChatGPT into the Apple ecosystem, separate from the core Apple Intelligence features. This partnership highlights continued progress from Apple to introduce AI capabilities into its products and we expect the iPhone 17 to have even more expansive AI capabilities, increasing potential demand for the new model that is on track to be released in 2025.”
Overall, AAPL ranks 4th on our list of stocks in Wall Street’s watchlist. While we acknowledge the potential of AAPL, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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