Apple will have difficulty growing in 2024 as it will this year – 12/21/2023 – Tech

Apple added almost US$1 trillion (R$4.88 trillion) in market value this year. Such gains in 2024 will be harder to come by.

As it seeks to halt four consecutive quarters of declining revenue, the world’s most valuable publicly traded company faces uncertainty in China, where government agencies are cracking down on foreign devices. Competition from Huawei is intensifying as Apple’s smartwatch business faces a possible ban in the United States days before Christmas.

The stock’s 50% rise this year — driven by investor bets that the iPhone maker will continue to generate big profits regardless of the health of the economy — has also left it in expensive territory. It is valued at 29 times next year’s projected earnings, nearly double its ten-year average valuation.

“The biggest risk to the megacap business model right now is money moving into other names,” said Eric Clark, portfolio manager at Accuvest Global Advisors, who has reduced his position in Apple and some other big technology stocks.

Clark notes that these megacaps facing higher valuations, slower growth and tougher year-over-year comparisons could see investors divert funds to “other areas that I believe may have more potential for 2024.”

Traders have stuck to blue-chip technology stocks this year as the Federal Reserve raised interest rates. Now, with signs that rates may have peaked as inflation eases, investors are developing an appetite for riskier stocks as the rally broadens.

With valuations stretched, any advancement for Apple would likely have to be driven by rising profits. Wall Street is currently forecasting revenue growth of just 3.7% in fiscal 2024 and profit expansion of 7.6%, according to average analyst estimates compiled by Bloomberg.

The disconnect between the company’s rise to a market value above $3 trillion and its tepid growth prospects helps explain why analyst enthusiasm has cooled.

While Wall Street is almost unanimously bullish on big tech companies, it is more cautious when it comes to Apple. The stock attracted just 34 equivalent buy recommendations. This pales in comparison to Amazon’s 67, Meta’s 65, and Nvidia’s 59.

However, not everyone is pessimistic. Wedbush Securities analyst Daniel Ives projects the stock will be worth $4 trillion in market value by the end of next year. His highest price target of $250 beats the $199 expected on average by analysts, according to data compiled by Bloomberg.

“While there are still concerns surrounding government iPhone bans in China, for now this issue is very workable and has not impacted demand for Cupertino in this key region, based on our recent checks,” Ives wrote in a note, referring to to the headquarters of the company based in California.

Even for Accuvest’s Clark, the challenges don’t diminish his view that Apple’s iPhone is “the greatest consumer staple ever created” and therefore a “higher multiple is justified.”

While the Nasdaq 100 index is up more than 50% this year, some stocks have missed the rally altogether. T-Mobile is up about 10% in 2023, but competitors Verizon and AT&T are falling. AT&T is the worst performer of the group due to concerns about the potential high costs it could face if it had to clean up contamination from lead-lined cabling across its nationwide network.