As a member of the “Magnificent Seven,” Apple (NASDAQ:AAPL) earned the market’s favor throughout 2023. However, this doesn’t guarantee similar results for Apple’s investors in 2024. Overall, the outlook for AAPL stock is good and we’re assigning it a “B” grade, but there’s no urgency to buy it now if you don’t want to.
It’s amazing to consider how quickly Apple’s market capitalization swelled from $2 trillion to $3 trillion. Getting Apple’s market cap to $4 trillion might not be so quick or easy. Ultimately, Apple’s shareholders should expect decent returns over the long run, but also need to acknowledge Apple’s challenges in the coming year.
Apple’s Shift Away From China
Relations between the U.S. and China were strained in 2023, and the situation might not get any better next year. This is relevant, as China has banned government officials from using Apple’s iPhones at work. Plus, the U.S. government has limited the exports of certain technology components to China.
Amid this tense backdrop, Apple is taking actions to shift its operations away from China. In particular, the company has its eye on India as a major source of components. According to The Wall Street Journal, Apple “and its suppliers aim to build over 50 million iPhones in India annually within the next two to three years,” followed by an “additional tens of millions of units after that.”
Furthermore, Apple is in the process of moving its iPad product-development operations from China to Vietnam. This may be a savvy move for Apple, especially if Sino-U.S. relations deteriorate during the coming quarters. Going forward, investors should keep tabs on Apple’s production costs to see if the company’s operational shifts have a positive long-term impact on Apple’s financials.
Serious Concerns for AAPL Stock Investors
There’s no denying that AAPL stock ran fast in 2023. Do Apple’s fundamentals justify the share-price move, though? It’s a question that one particular analysts wants investors to consider.
Barclays Senior Analyst Tim Long said that he struggles with Apple’s “multiple and valuation.” Not long ago, Apple’s trailing 12-month price-to-earnings ratio was above 31x, versus Apple’s five-year average P/E ratio of 26.42x.
Long observed that Apple’s near-term forecasts aren’t highly optimistic. “They’ve basically lowered guidance maybe four quarters in a row. They don’t give official guidance, but numbers have come down for four quarters in a row,” Long stated.
Along with that, Long sees soft demand for Apple’s products, and especially the iPhone, in China. Notably, Apple’s revenue from China fell 2.5% year over year in the company’s most recently reported quarter.
Be Cautiously Optimistic With AAPL Stock
You might or might not agree with Long, who concluded that Apple’s “fundamentals are not good.” Still, it’s reasonable to be concerned that Apple may be somewhat overvalued after this year’s powerful share-price rally.
Apple has its share of challenges to overcome, but the company will probably continue to grow its market cap in the long term. Therefore, AAPL stock earns a “B” grade. Investors may choose to hold their Apple shares and possibly add to their positions, but there’s no need to over-invest in Apple right now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.