Apple received yet another downgrade this week, the latest in a stream of cautious calls for the world’s largest company. It could present an opportunity for new investors. Redburn Atlantic analysts on Wednesday cut Apple shares to hold from buy , citing limited multiple expansion opportunities and narrow upside in iPhone sales. And Redburn is far from alone: Only 57% of analysts covering Apple have a buy-equivalent rating on shares, according to FactSet data. That number hasn’t been below 60% since July 2020 when analysts were concerned about growth during the first year of the pandemic. Notably, only 9% of analysts are in the outright sell camp. The roughly 34% who deem Apple a hold appear to be looking for consolidation, or a chance for earnings to catch up with shares after a very strong 2023 performance. Apple jumped around 48% last year during a monstrous run in the tech sector. Cautious calls in 2024 Here’s a breakdown of four other cautious Apple calls that pressured shares and contributed to just two positive sessions for Apple in the past eight. Barclays downgraded Apple to underweight (sell) from hold on Jan. 2 — the first trading day of 2024. Analysts at the bank argued that Hardware sales remain weak, while Services growth fails to exceed 10%. Barclays slightly lowered their price target for the stock to $160 per share from $161 apiece, saying the current valuation is stretched. “Given we believe numbers will not be moving higher, we see P/E multiple pressure going into the new year,” analysts wrote in the research note. Apple shares dropped more than 3.5% that day. Piper Sandler followed suit on Jan. 4, downgrading Apple shares to neutral from buy. The firm lowered its price target to $205 from $220 apiece, citing “valuation concerns and broader handset and macro weakness in 1H24.” The stock — already on a three-session losing streak at the time — dropped for a fourth day in a row. Bernstein on Monday reaffirmed its hold rating and reiterated its Apple price target of $195 apiece. Analysts noted that shares are deserving of a premium multiple, but the “valuation looks elevated compared to consumer comps that are also high quality but potentially face less disruption risk.” Bank of America on Tuesday stayed in the hold camp. Analysts reiterated their Apple target price of $208 apiece, adding that “positive catalysts of new product introduction and stable iPhones are offset by a potentially weaker consumer spending environment.” Good time to own Apple Most of the wary analysts in 2024 are taking issue with Apple’s valuation. Shares have been trading above their five-year average forward price-to-earnings multiple. It’s a factor we recently highlighted in a separate commentary. However, history shows that when many analysts on the Street step to the sidelines on Apple, it’s a good time to have some exposure. What if the Vision Pro mixed reality headset is a bigger success than folks think — and, in turn, results in upside to Services revenue in 2024 versus current estimates? What if Siri gets a generative artificial intelligence upgrade and makes the Apple ecosystem even stronger than it already is? The big question for investors is, of course, now what? We sold some shares of Apple and downgraded the name to a 2 rating back on Jan. 2. That, however, doesn’t change our “own it, don’t trade it” mantra around Apple. Jim Cramer said it best following the sale: “No one ever got hurt taking a profit.” “These darned [Magnificent Seven] companies are so good,” Jim added at the time. “They always seem to come up with something that makes them more compelling than we thought.” “That’s the definition of a good investment, as long as you do some trimming after a big gain,” he stressed. Discipline trumps conviction. What do we mean by this? In this case, discipline is locking in profits and not letting a position grow too large, and conviction is “own it, don’t trade it.” In the end, we want to run a diversified portfolio that can perform well in a myriad of market conditions — not an Apple fund. While our 2 rating does put us in the hold camp, the stock is really interesting here for those who don’t own any shares in this best-in-class company. That may sound like we’re talking out of both sides of our mouths — but with all things investing, there is nuance and everyone’s situation is different. With a greater than 5% weighting for Apple in the portfolio and a low cost basis, we need to see a much bigger pullback before considering adding to our position. If that sell-off never comes, our current exposure is already large enough for us to benefit and maintain a diversified portfolio. Further gains in Apple stock, even if we don’t buy more, will boost our exposure within our portfolio. For investors who don’t own Apple, there may be an opportunity to get that small starter position. That way, if we don’t get a larger pullback, you’ve got something on, you’re making money to the…
Read More: Wall Street has not been this cautious on Apple stock in years