Apple: We Advise Waiting for a Pullback Before Investing

We’ve raised our fair value estimate and sales forecast, but still see Apple stock as rich.

William Kerwin 1 December, 2023 | 9:36AM
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Key Morningstar Metrics for Apple

 

We’ve raised our fair value estimate for Apple AAPL stock to $160 from $150 after modest upward revisions to our five-year sales forecast. We’ve also lowered our Uncertainty Rating to Medium from High, based on our higher conviction in the firm’s ability to offset consumer spending cycles with its premium and differentiated approach. We continue to see Apple as a dominant technology ecosystem provider meriting a wide economic moat, and we maintain our exemplary capital allocation rating based on a strong investment track record that has helped carve that moat.

We believe Apple is a fundamentally excellent company, but continue to see its stock valuation as challenging. That valuation has surged more than 40% in 2023, based on new product launches and improving macroeconomic conditions. Simply put, we think Apple stock has outpaced the firm’s fundamentals, and recommend waiting for a pullback before investing.

We believe Apple has cemented a long-term position atop the consumer electronics industry with a focus on a premium ecosystem of tightly integrated hardware, software, and services. We see its flagship iPhone as the linchpin of this ecosystem from which Apple derives its pricing power, switching costs, and network effect. In our view, every other Apple device and service sees its greatest value from further locking customers into this walled garden.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Apple Inc182.32 USD0.42Rating

About Author

William Kerwin  

is an equity analyst on the technology team for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar Inc. He covers the IT supply chain, hardware, and semiconductor stocks.

Before joining the firm full-time in 2019, Kerwin was an intern on Morningstar's basic materials team.

Kerwin holds a Bachelor of Science in economics with a math emphasis and French from the University of Wisconsin-Madison. He also holds the Chartered Financial Analyst® designation.

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