Apple stock attracts another downgrade on 'full' valuation

investing.com:

Redburn analysts cut the rating on Apple (NASDAQ:AAPL) stock to Neutral with a price target of $200 per share price target.

This is now the third analyst to lower their rating on Apple’s stock this year as Barclays and Piper Sandler downgraded last week. Moreover, DA Davidson initiated research coverage with a Neutral rating last week.

While anticipating a return to iPhone growth in CY24, analysts acknowledge limited upside potential in the coming years, with a potentially underwhelming March quarter affecting confidence in this outlook.

“Each of the two parts of the business [Products and Services] faces some challenges that we believe will limit any further multiple expansion for each of the components,” the analysts said in a note.

Simultaneously, escalating regulatory risks may impede Apple's ecosystem monetization.

“While any regulatory developments are unlikely to translate into a financial impact in the next couple of years, growing awareness of Apple’s exposure here will likely pressure the multiple that investors are willing to place on the Services business, in our view.”

The analysts also noted that AAPL’s P/E ratio is now surpassing Nike's for the first time for an extended period. Hence, the valuation “now appears full.”

“Looking ahead, we forecast Services’ contribution to EPS to continue to increase, but only relatively modestly, reaching 49% at YE26 compared to 46% currently. As a result, we see limited potential for further multiple expansion from evolving business mix,” the analysts wrote.

Apple stock is trading relatively unchanged in early Wednesday trade. It fell 0.2% yesterday.