"Apple fan" faith has collapsed again?

A spate of bad news from Apple (AAPL.US) has cast doubt on claims that the world's most valuable company is immune to risks associated with economic turmoil, the Wise Financial app has learned. The cold weather for the new generation of iPhones in China has raised concerns about Apple's ability to justify its expensive valuation and avoid four consecutive quarters of revenue declines-which would have been the company's worst performance since 2001. Apple, meanwhile, is grappling with political tensions and overheating devices, and KeyBanc this month became the latest company to downgrade the stock. James Abate, Management chief investment officer at Centre Asset, said the disconnect between Apple's weak growth and high share price was hard to ignore. He said: "Apple's growth is the weakest among large-cap stocks, but its stock price has not fallen to the price-to-earnings ratio when it was not growing." Abate believes that due to Apple's "systemic" importance to the stock market, investors should hedge Apple's valuation risk through put options. Apple shares have fallen 10 percent since the end of July, compared with a 5.6 percent decline in the Nasdaq 100 over the same period. Although Apple is still the largest component of the S & P 500 index, accounting for more than 7.1 percent of the index's weight, Apple's market value has evaporated by more than $320 billion. Since the end of July, Apple's share price has weakened! image.png The huge market influence makes it difficult for investors to avoid Apple stock, but other large-cap stocks may offer more attractive growth prospects and more reasonable price-to-earnings ratios. "You can find a compelling underlying reason for Amazon's (AMZN.US) margin growth, Microsoft's (MSFT.US) and Nvidia's (NVDA.US) AI boom, or Alphabet's (GOOGL.US) and Meta's (META.US) weathering the slowdown in consumer advertising, but Apple hasn't had revenue growth for a while," Abate said." "This is not like Cisco (CSCO.US) in 1999, which is about to fall off a cliff, but if there is real chaos in the market, it may be stocks such as Apple that bear the brunt." Apple will report its fourth-quarter results in early November, and analysts expect its revenue to fall 1% year-on-year. According to data from Bloomberg Intelligence, the overall revenue of the S & P 500 index technology sector is expected to increase by 1.5 this quarter. Apple's revenue may have fallen for four consecutive quarters! image.png Against this background, Apple's expected price-to-earnings ratio is 26.6 times, which is higher than the Nasdaq 100 index and Apple's own long-term average price-to-earnings ratio. The stock also trades at a premium on a forward sales basis, with a free cash flow yield of less than 3.7 per cent, compared to its 10-year average return of about 6.4 per cent. While Apple is on track to return to positive revenue growth in fiscal year 2024, the growth rate will be much slower than it has been in recent years, and new products like the Vision Pro headset are not expected to be meaningful drivers any time soon. This has led some to retreat. KeyBanc Capital Markets recently downgraded Apple to "hold," citing concerns about its valuation and growth potential. Fewer than 2/3 of the analysts Bloomberg tracked gave Apple a "buy" rating, the lowest percentage of large-cap stocks so far. Michael Kirkbride, portfolio manager at Evercore Wealth Management, said: "The challenge is always there, but now seems to be a trickier period, especially with price-to-earnings ratios at the high end of their historical range." "We are very cautious about increasing our holdings of Apple shares at the current price level, but are willing to buy at a lower price." Still, Kirkbride said investors could benefit from the skepticism, given Apple's ability to handle challenges in the past. "Apple is still a top global brand, it has unparalleled supply chain expertise, and its free cash flow means it has a different return on capital than other companies. It's worth sticking with," says Kirkbride."