Apple (NASDAQ:AAPL) may boast rock-solid fundamentals and improving product cycles, but according to Raymond James analyst Melissa Fairbanks, much of that optimism is already baked into the stock. In her view, Apple’s current valuation leaves little room for meaningful upside in the near term.
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“While we acknowledge the company’s leadership in consumer hardware, ecosystem, and services, with a highly sticky value proposition, we believe much of this value is already well understood by investors,” the 5-star analyst explained. “Further, given the broad user base (now ~2.4 billion), we believe incremental gains from technology upgrade cycles will become more difficult to attain, much less move the needle.”
Fairbanks’ comments come amid what is widely viewed as a generally successful iPhone 17 refresh cycle, with the iPhone 17 lineup boasting features that support deeper integration of GenAI capabilities. While adoption of AI functionality at the edge is expected to remain relatively limited in the near term, Fairbanks believes Apple’s on-device AI models, together with secure cloud processing, should enhance core productivity applications and Siri across the new lineup, a shift she expects will “be a catalyst for a healthy upgrade cycle after a number of generally lackluster years.”
But with the stock up by 23% over the past 6 months, driven by the “relative success” of the refresh cycle, Fairbanks is concerned about a valuation “several turns above the 5-year average P/E.”
Moreover, while the momentum seen in the Services business is encouraging, the investment case is “still a hardware story.” No doubt, the traction of Apple Services is a real positive, representing ~26% of FY25 revenue and expected to remain the main growth driver on a percentage basis, helping to offset the “highly seasonal” nature of hardware sales through a higher-margin, recurring revenue stream. Additionally, Apple’s software ecosystem continues to address large end markets, reducing the likelihood of users migrating to alternative platforms. Even though Fairbanks sees the integration of services with hardware as a “positive element” of the narrative, she expects iPhone upgrade cycles to remain the primary driver of “broader returns,” and therefore anticipates the share price will continue to reflect this cyclicality, albeit within an “overall upward trend.”
“While we acknowledge AAPL is largely viewed as a core holding, we see limited near-term catalysts to drive meaningful outperformance versus our coverage universe,” the analyst summed up.
To this end, Fairbanks assigns AAPL stock a Market Perform (i.e., Neutral) rating without having a fixed price target in mind. (To watch Fairbanks’ track record, click here)
Other analysts do have numbers in mind, and their average price target of $299.49 points to ~15% upside over the next year. In total, 11 analysts sit on Hold, but with 19 Buys and just 2 Sells, AAPL still earns a Moderate Buy consensus rating. (See AAPL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.