Apple Stock Hit a New High Today. Why It’s Still Risky.

Apple
stock has been on a tear, jumping 45% so far this year. Tech stocks in general have had a solid six months; investor excitement surrounding artificial intelligence has helped the
Nasdaq Composite
to surge 30% in 2023.

But AI isn’t the only factor helping Apple. The company reported strong earnings in May, and investors are excited about what Apple’s newly-announced, 15-inch Macbook Air laptop and the Vision Pro headset can do for sales down the line. Investors are also gearing up for Apple’s iPhone 15, which is expected to launch sometime in September 2023.

However, Apple, whose shares currently trade at 28.8 times forward earnings, could still be hit hard by a U.S. recession.

Most of Apple’s revenue stems from product sales: $51.3 billion—or 54% of the company’s second-quarter revenue—came from the iPhone. Consumers hit by a recession may be less likely to buy Apple products or pay services through the App Store or Apple Music, impacting the company’s top-line.

UBS analyst David Vogt downgraded Apple to Neutral from Buy with a price target of $190 on June 12, citing a potential slowdown in iPhone sales and services revenue.

“Tough comps, macro headwinds, and slowing growth in the iPhone installed base will result in a material deceleration in Services revenue growth in FY23 and FY24,” the he wrote. 

Vogt is not the only analyst to point out the risks.

“Apple has continued to expand its product portfolio and work on a pipeline of new innovations,” Monness Crespi Hardt analyst Brian White, who rates the stock as a Buy with a $188 price target, wrote in a research note earlier this month. “That said, we believe the near-term macroeconomic environment and geopolitical landscape pose challenges.”

Write to Angela Palumbo at [email protected]