Will you settle for a pretty good year after a magnificent one? Apple (NASDAQ:AAPL) still deserves its designation as a member of the prestigious “Magnificent Seven” club. AAPL stock gets a “B” grade and shouldn’t be expected to rally as sharply in 2024 as it did in 2023.
To put this in perspective, the Apple share price gained nearly 50% last year. Apple’s forward price-to-earnings ratio was 28x, which isn’t outlandishly high but might still raise valuation concerns. So, as we’ll discuss in a moment, not every expert on Wall Street is bullish about Apple stock for the next 12 months.
AAPL Stock Gets a Surprising Downgrade
Like other “Mag-Seven” members, Apple was a darling of the financial market in 2023. However, not every expert on Wall Street is extremely bullish about Apple stock.
For example, according to Barron’s, D.A. Davidson analyst Gil Luria warned that Apple “needs to get ‘unstuck’ on innovation to improve growth in its existing products and add new products.”
Luria’s “neutral” rating and $166 price target (which implies downside from the current price) on AAPL stock certainly don’t suggest that 2024 will offer another year of magnificent returns.
What really caught the market’s attention, however, was Barclays analyst Tim Long’s surprising downgrade of Apple stock from “equal weight” to “underweight.” It’s not very often that analysts assign Apple shares a “sell”-equivalent rating. Furthermore, the Barclays analyst reduced his price target on the stock from $161 to $160.
“The continued period of weak results coupled with multiple expansion is not sustainable,” Long predicted. Perhaps he’s referring to Apple’s 1% year-over-year revenue decline in fiscal 2023’s fourth quarter. Apple’s sales decreased 3% in the company’s most recently reported fiscal year.
Apple’s Pricey Headset Might Not Generate Much Revenue
Don’t get the wrong idea. Apple is still a redoubtable giant in the technology-gadget industry. The company will undoubtedly continue to generate billions of dollars in smartphone sales over the coming quarters.
That’s important, since Apple might need strong smartphone sales in order to offset potential softness in mixed-reality headset sales. Believe it or not, Apple’s Vision Pro headset will come with a starting price of $3,499.
Many Millennials and Zoomers will cough up over $1,000 for an iPhone, but will they pay $3,499 or more for a mixed-reality headset? Apple may generate a decent amount of revenue per headset sale, but at that price point, the company might not end up selling a lot of Vision Pro headsets.
Basically, the company is wagering on the strength of the Apple brand spilling over into new products. Frankly, the anticipated explosive growth of the metaverse and mixed-reality headset market hasn’t panned out yet. Hence, it will be interesting to see if Apple can actually sell a large number of its hard-to-afford headsets.
Be Realistic With Apple Stock
Can one magnificent year be followed by another one? Investors can certainly hold Apple stock in 2024 as the company is still a technology juggernaut. Yet, they should also have realistic expectations for the next 12 months.
Looking ahead, AAPL stock may end up taking a breather for a while, so there’s no need for investors to load up on Apple shares right now. Just be patient and continue to monitor Apple’s sales data, including both the iPhone and the company’s high-priced mixed-reality headset.
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.
