It’s tempting to just succumb to the overwhelmingly positive sentiment surrounding Apple (NASDAQ:AAPL) stock and just give it an “A” rating. Yet, we’re assigning the stock a “B” grade for now, because of potential issues concerning Apple’s smartphone sales.
Of course, we’re not detracting from Apple’s achievements. The company is among a handful of big-tech names leading this year’s stock-market rally.
However, it’s important for investors to see both sides of the issue before considering any share purchases or sales, even with a revered tech titan like Apple.
AAPL Stock’s Momentum Is Undeniable
As the financial press celebrates Apple’s astounding achievement of a $3 trillion market capitalization, one can only feel sorry for the perma-bulls and short-sellers.
As Wedbush analyst Dan Ives put it, the “Apple bears and skeptics continue to scratch their heads,” with many complaining about Apple’s apparently “‘broken growth story’ this year in a tougher backdrop to which we firmly believe the exact opposite has happened.”
With the bears continually being on the wrong side of the trade, it’s easy to find Apple bulls on Wall Street. For example, Citi analysts recently gave AAPL stock a “buy” rating and an ambitious price target of $240.
According to The Fly, the Citi analysts cited Apple’s “continued gross margin expansion” as a factor that Wall Street is apparently underestimating. The analysts observed Apple “consistently gaining share from Android phones.”
Apple’s Soft Smartphone Sales May Be a Concern
Clearly, Apple is a darling of the market right now. AAPL stock is likely to maintain its momentum in the short term. However, don’t assume that Apple is a perfect business with no issues.
UBS analyst David Vogt recently revealed a cautionary tone about Apple. He found that Apple’s iPhone “sell-through” for the month of May totaled 14.5 million units. That might sound like a lot of smartphones being sold. However, it’s Apple’s lowest monthly iPhone sell-through since August 2022.
This also marks eight consecutive months of decline, as well as a 2% decrease compared to May of 2022. Sell-through for iPhones in the U.S and Europe dropped 12% and 13%, respectively, on a year-over-year.
Apple is involved in a variety of businesses. Yet, smartphones are Apple’s bread and butter, so to speak. If Apple falters in this area, the tide of sentiment on Wall Street could turn against the company later this year. Vogt may have had this consideration in mind when he reduced his rating on AAPL stock from “buy” to “neutral.”
Don’t Fight the Trend With AAPL Stock
Apple is a favorite among today’s investors, so betting against it could be a costly mistake. Don’t be surprised, then, if Apple’s market cap continues to grow throughout the year.
Apple’s smartphone sales may be on the softer side. That’s a concern to remember, so there’s no need to over-leverage yourself on AAPL stock today. Instead, investors might think about holding their current Apple shares, or possibly adding just a few to their portfolios.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
