A Wall Street analyst on Wednesday downgraded Apple stock on earnings risks, rising competition and valuation.
Needham analyst Laura Martin lowered her rating on Apple to hold from buy and removed her price target. She also cut her near-term sales and earnings estimates for the consumer electronics giant.
On the stock market today, Apple stock slid 0.2% to close at 202.82.
"Based on technicals, we estimate that Apple has $20-30/share of downside risk vs. $15/share of upside from current price levels," Martin said in a client note.
Among Big Tech peers, she prefers Google parent Alphabet and Amazon.
"Most of the Big Tech competitors we cover have articulated a strategic vision that replaces Apple's ecosystem," Martin said. "A key long-term strategic issue Apple faces is that it can only use GenAI (generative artificial intelligence) to improve its own ecosystem, whereas Google can improve its Android ecosystem and its Cloud business can charge a fee for thousands of other companies to use its LLM (large language model). This incremental revenue stream aids Google's revenue growth and profitability and gives Google the ability to make faster product improvements to Android (or replace it with smart glasses) using its LLM backbone."
She added, "Apple does not own a Cloud business so this becomes a cost center, rather than a new revenue and margin upside driver, which should result in a valuation discount to Google and Amazon over time."
Apple Stock Down Year To Date
AI innovations open the door for new hardware that threatens Apple's iPhone and other devices, she said. Companies like Google and Meta Platforms are pursuing smart glasses. And OpenAI recently purchased IO, a company run by former Apple designer Jony Ive, who is developing a personal AI device.
For Apple stock "to work," it needs the catalyst of an iPhone replacement cycle, Martin said. She does not see that happening in the next 12 months.
Year to date through Wednesday's close, Apple stock is down 19%.
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