Top 10 Stocks Analysts are Watching as AI Selloff Deepens

3. Apple Inc (NASDAQ:AAPL)

Number of Hedge Funds Investors: 158

Lo Toney, Plexo Capital founding managing partner, said in a latest program on CNBC that Apple Inc (NASDAQ:AAPL) CEO Tim Cook’s efforts to persuade President Donald Trump for exemptions from tariffs apparently did not work and the company may need to pass on the impact of the levy to consumers or suppliers.

“I think the thought was that the ability for Cook to pilgrimage down to Mar-a-Lago and achieve what he did last time clearly isn’t going to be the case. It’s well laid out—either Apple can squeeze the suppliers a little bit, but I think that’s probably already happened as a natural course of business, or it can be subsidized by the telcos, passed on to the consumer, or absorbed by Apple itself. It’s going to impact someone somehow.”

Apple’s results were helped by Services revenue in the latest quarter, but the key challenges haunting the company remain as they were. Many analysts believe 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.

Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:

“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.

The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.

Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.