Investment firm Needham has downgraded Apple (AAPL, Financial) from "Buy" to "Hold." Analyst Laura Martin highlighted that Apple's revenue and profit growth are lagging compared to its peers. Despite Apple's premium valuation, its revenue and profit growth rates for the March quarter were significantly slower than the other major tech giants, with revenue growth lagging by 2-3 times and profit growth by 3-12 times.
Martin expressed concerns that this underperformance could impact Apple's forward P/E ratio of 26, which is 50% above its ten-year average and 25% higher than the S&P 500. This is particularly concerning in the absence of a significant iPhone upgrade cycle. Additionally, Apple's "platform tax" of 15%-30% on App Store transactions faces regulatory and competitive pressures, with all competitors lobbying for its removal.
Furthermore, Apple's delay in generative AI innovation raises questions about the future of its iOS ecosystem. Martin suggests an ideal entry point for Apple shares would be between $170-$180. She would consider a bullish stance if Apple aggressively pursues an advertising revenue strategy to boost revenue and earnings per share. Currently, she favors the growth prospects of Google (GOOG) and Amazon (AMZN).
