Analyst: Apple’s (AAPL) Valuation Is “Ridiculously Stretched”

After downgrading Apple (AAPL) stock to Sell from Neutral yesterday, MoffettNathanson Co-Founder and Senior Analyst Craig Moffett told CNBC that he had made the move due to concerns about the name’s valuation.  However, Moffett did add that the conglomerate is facing “legitimate risks,”

“The (stock’s) valuation has run too far, and there are legitimate risks that simply aren’t reflected in the stock today,” the analyst warned.

A wide view of an Apple store, showing the range of products the company offers.

Moffett believes that the company’s status in China is “weakening,” while AI has not produced the “supercycle” for Apple that the stock’s biggest fans had expected.

Noting that the shares were changing hands for 33 times the company’s earnings as of yesterday, Moffett pointed out that Apple’s PEG ratio is significantly higher than that of Amazon (AMZN), Meta (META) and Alphabet (GOOG,GOOGL). Specifically, Apple’s PEG ratio is above three, while the PEG ratios of the other names are “around two,” the analyst reported.

The PEG ratio compares a stock’s price-earnings ratio to the company’s growth rate.

In light of the large disparities between Apple’s multiples and that of its peers, the forward valuations of AAPL stock are “ridiculously stretched relative to its peer group,”  Moffett exclaimed.

The analyst placed a $188 price target on the shares, well below their current level of $242.

While we acknowledge the potential of AAPL, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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 the cheapest AI stock.

READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: The writer owns shares of AMZN. He has no plans to trade them in the next 24 hours.  This article is originally published at Insider Monkey.