Apple’s stock is no longer worth buying after reaching a record, says Wall Street firm

Read: It’s a ‘bull market’ for stocks. Here’s what that means.

Gains for a handful of big stocks, chiefly the tech godfathers, have been powering this market higher. Among those, Apple shares
AAPL,
-0.43%
rose 2.8% on Monday to finish at a new all-time closing high of $183.79, as its market cap hits $2.89 trillion — the closest second is Microsoft at $2.46 trillion. How big is that?

That brings us to our call of the day from UBS analysts who have joined the Wall Street minority in taking a bearish view on Apple, as they warn that a weaker economy will come to bear on its important iPhone sales.

“Soft demand trends and a 50% premium to the mkt (market) = unfavorable risk/reward,” said a UBS team led by David Vogt, which downgraded Apple to neutral from buy.

They nudged up their price target on the tech giant to $190 per share from $180 with a caveat: “If Apple shares were to trade at our $190 [target], total shareholder return (price appreciation and dividends) less than 5% is insufficient in our view to maintain a buy rating given softer fundamentals.”

That recently unveiled $3,500 headset doesn’t get a mention here, as they zero in on the iPhone. Their latest smartphones survey showed 12-month purchase plans for the popular cellphone had softened over the past six months. They expect “at least” a 1% to 2% drop in iPhone unit growth, or phones sold, in the second half of 2023, with Mac revenue down 3% to 5%.

While emerging market growth is encouraging, the U.S., China and Europe represented around 70% of iPhone demand for the March quarter, from 72% last year as sell-through for those regions fell 7.5% annually, noted UBS. IPhone sales in the rest of the world, including emerging markets and Japan, fell 2.4% in the March quarter, while the important India market represented just 3% of sales for that quarter, a 34% rise annually.

“As such, we do not believe the unit TAM [total addressable market] and growth outside of the three largest markets is large enough to drive long-term sustainable iPhone growth above mid-single digits,” said UBS.

Vogt and they team note that Apple shares currently trade at 29 times forward 12-months estimates — above the 1, 3 and 5-year averages of 25, 27 and 23 times, respectively. That’s as Apple’s roughly 50% relative premium to the S&P 500 is around 10 year highs, they say, adding: “While a premium is justified, expansion is unlikely given growing headwinds.”

Ahead of the market’s open, Apple may be getting dinged by this downgrade, with shares off 0.6%, but fellow tech brethren Amazon
AMZN,
-0.13%,
Tesla
TSLA,
+3.24%
and Nvidia
NVDA,
+2.92%
seem ready to step up, all headed for ballpark 1% gains.

Also read: Cathie Wood’s ARK dumps some Tesla, Nvidia stock while scooping up Meta shares

The markets

Stocks
DJIA,
+0.55%

SPX,
+0.68%

COMP,
+0.70%
are climbing, while Treasury yields
TMUBMUSD10Y,
3.777%

TMUBMUSD02Y,
4.628%
slide post data. Oil prices
CL.1,
+3.50%
are up over 3% after Monday’s demand-fueled rout, with an OPEC monthly report ahead. The dollar
DXY,
-0.45%
is down over 0.4%.

Read: Why ‘King Dollar,’ benefiting from financial instability fears, can stay high this year

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily. 

The buzz

May consumer prices met expectations, falling to levels not seen in a year. Headline CPI rose 0.1%, which brought the annual rate to 4% from 4.9% in April. Core CPI, which strips out food and energy prices, rose 0.4%, and fell to 5.3% from 5.5% annually. Ahead of that, a survey on small-business optimism showed confidence improving, though inflation remains a concern.

The two-day Fed meeting also kicks off Tuesday — here are all the possible outcomes. China, meanwhile, cut a key policy rate as the country’s COVID recovery has lost steam.

Manchester United shares jumped 17% in premarket trade after a report that Qatar’s Sheikh Jassim bin Hamad al-Thani will be named preferred bidder for the soccer club.

Bunge
BG,
+1.81%
said it will combine with privately held Viterra Ltd. in a cash-and-stock deal valued at about $8.2 billion. Shares are down about 3%.

Oracle stock
ORCL,
+1.23%
is up 5% after the cloud computing group reported forecast beating results, boosted by cloud revenue, as executives highlighted demand by AI customers.

Read: Ray Dalio says AI technology is both ‘fabulous’ and ‘dangerous’

The Federal Trade Commission has filed an injunction to block Microsoft’s
MSFT,
+0.47%
acquisition of Activision Blizzard 
ATVI,
+1.96%.

SoftBank-owned U.K. chip designer Arm, is looking for an lead investor, possibly Intel
INTC,
+1.48%,
to anchor its highly anticipated initial public offering.

EU regulators are considering a dismantle of search giant Google’s
GOOGL,
+0.23%
ad-tech business on anticompetitive grounds, The Wall Street Journal reported.

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The chart

What is the most crowded trade among investors right now? Bank of America’s latest global fund manager survey says it’s that bullish view on Big Tech again, and by a mile:

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Random reads

SpaceX has hired a 14-year old college graduate.

“Dead” woman knocks on her coffin at funeral.

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