Needham downgraded Apple (AAPL) to Hold from Buy without a price target. The firm reduced estimates citing threats to Apple’s near-term revenue and earnings growth. Every big technology competitor wants to take Apple’s 15%-30% platform tax, and generative artificial intelligence innovations open the door for new hardware form factors that threaten iOS devices, the analyst tells investors in a research note. Further, Apple trades at a forward year 2026 price-to-earnings ratio of over 26-times, “which looks expensive on several metrics,” contends Needham. The firm believes that for the stock to work, Apple must have the catalyst of an iPhone replacement cycle, which Needham does not foresee in the next 12 months. Until then, the $170-$180 share range is a better entry level, it tells investors. If Apple decided to aggressively pursue an advertising revenue stream, it could materially accelerate the company’s revenue and earnings growth, Needham adds. The firm prefers shares of Alphabet (GOOG) (GOOGL) and Amazon.com (AMZN) to Apple. Despite Apple’s premium valuation, it is growing revenue and margins the slowest among its big tech competitors, the analyst explains.
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