After multiple warnings Apple ((((NASDAQ:AAPL) Finally, the market is struggling with investment opportunities in slow-growing technology companies.The tech giant got an artificial boost from Covid’s pull forward, which is very important to investors Understand that the new device is not the savior of inventory.my Investment paper Apple remains bearish until its inventory is completely flushed and strong growth is no longer appreciated.
AR / VR hype
Back on May 19th, Apple apparently Proven They submitted their new mixed reality headset to the board of directors. Such a move is usually one of the last steps towards product launch, but such a move is not guaranteed.
That day, stocks were hit by a slump in the market, but Apple roared on May 23 and fell above $ 143. Inventory is far from the annual high, but if a new AR or VR device significantly increases sales, Apple will only be supported at this level.
Recently, Star Apple analyst Katie Hooverty Lower her price target Stock prices have fallen from $ 210 to $ 195 due to difficult economic conditions. Morgan Stanley (MSAnalysts have reduced their June quarter earnings forecast by 3% to $ 81.1 billion, based on a price target of $ 6.43, which is a PE multiple of 30.3 times the 2011 estimate.
These numbers are from the last few weeks before recent market weaknesses and some ongoing COVID Blockade in China. FQ3’22’s current analysts’ revenue estimates are $ 82.8 billion, with growth of only 1.7%. Estimates from Katy Huberty are only minimal growth for the current quarter.
Many investors are blowing away these weak growth rates due to the excitement of new mixed reality devices and future AR smartglass devices that may be released by 2024. There’s a lot of excitement about these devices, but Apple isn’t expected to produce a lot of revenue from these devices compared to its current revenue base.
Given what Katy Huberty had already estimated, this device will generate minimal revenue in the early stages. Her forecast is that AR / VR product revenues for 2014 will reach $ 29 billion, based on a tech giant shipping 31 million units with an average price of about $ 750.Analyst Ming-Chi Kuo’s Prediction Sales of 3 million units in 2023 By 2024, there will be nearly 10 million second-generation devices. Of course, these numbers were before recent product delays pushed initial sales to early 2023.
As explained in preliminary survey, Apple Watch took about 4-5 years to actually increase sales to meaningful sales levels. The company did not reach 31 million units from its launch in 2019 to the fifth year. That year’s sales were 8.2 million, probably backed by Covid.
Katy Huberty compared expectations for an AR / VR device that’s closer to the iPad, but the demand for this device is much higher because it’s more productive than using the iPhone. iPad went on sale immediately 32.3 million units By the second year, sales exceeded $ 30 billion in 2011. In addition, the average unit price in 2012 was only $ 329.
Katy Huberty is using an average AR / VR unit price of $ 750 by 2026, but many data points suggest that the price of the initial device is much higher.How much does a Meta Platforms Oculus Quest Pro device match an upcoming Apple device cost? ~ $ 799.. These companies can struggle to sell mixed reality headsets in these price ranges.
Apple hasn’t released a new device that costs close to $ 1,000. Investors need to be very careful about hype from this mixed reality product, and inventory will not be completely washed away until the hype is gone.
Katy Huberty has set a price target of $ 195 for its share price, based on an estimate of $ 6.43, which is 30 times EPS. The average analyst has a similar view with a $ 188 price target.
Stock prices will not be washed away until some prominent analysts have lowered Apple’s price target to less than 20 times the EPS target.Recent price cuts Snap Inc. ((((snap) When Roblox ((((RBLX) Highlight the washout events required for these stocks.
Justin Patterson, Analyst, KeyBanc Capital Markets Lower price targets From $ 45 to $ 27 on Snap, Benchmark lowered its goal by 50% to $ 20. The stock has a 52-week high of over $ 83.
Roblox saw Atlantic analysts lower their price targets to current prices.Analyst Reduced target to $ 30 From $ 60 in stocks peaking just over $ 140 at the end of 2021 with Covid’s pull forward use.
Apple’s washout event isn’t showing up yet. In the last four analyst iterations, there were price targets of $ 200, $ 200, $ 185, and $ 210, respectively.
Apple is trading at the lowest forward PE multiple last year, but investors need to wonder why a $ 140 stock deserves a valuation of a forward EPS estimate of about 23 times. At best, Apple is pretty well-received, but keep in mind that the average analyst expects stocks to rise 35% from here.
Apple doesn’t need the same wipeout event because it doesn’t have the volatile growth rates of the other tech names described in this article. Snap has fallen 43% yesterday as a sign of slowing advertiser demand on social media platforms, but Apple needs to trade more to keep up with growth.
Analysts do not predict that EPS growth will exceed 6% after 2010. If the stock is traded at a PE that is 15 times more aggressive to these growth rates, Apple is only worth $ 98, based on the $ 6.54 EPS estimate for 2011. In the current environment, there is a risk that EPS estimates will be reduced.
Apple is definitely a premium company that deserves a premium rating, but investors need to understand that $ 120 is such a premium rating. Stocks will not be washed away until they fall to these levels, and a few influential analysts will significantly lower their price targets.
The point for investors is that Apple isn’t even on the verge of being washed away. No analyst has been worried about stock prices, but Apple has already fallen by more than $ 40 from its highs. Investors need to avoid stocks until they fall to a more rational valuation below $ 120 and analysts begin to lower price targets to meet limited growth expectations. Apple still has too many hype premiums in stock.