Tim Cook, CEO, Apple
Brendan McDermid | Reuters
Apple, one of the best-performing stocks this year, is also the name that analysts have been the most wrong about in their forecasts.
The tech giant has soared 82% in 2019, the best performer among the 40 largest U.S. stocks, but at the same time, Apple has seen the biggest increase in analyst sell ratings, according to Bespoke Investment Group.
Sell ratings on Apple rose this year from zero to five among 44 analysts who cover the company, according to FactSet. It has the highest percentage increase of sell ratings among the 40 largest stocks, according to Bespoke.
Analysts who downgraded the stock this year, including Maxim Group and Rosenblatt Securities, cited concerns about lower iPhone sales next year as well as escalated trade tensions.
Still, Apple’s stock managed to climb to all-time highs, making it the most valued U.S. company by market capitalization. The other so-called FAANG names including Amazon, Facebook and Microsoft all saw a drop in sell ratings this year, according to FactSet.
Apple has been haunted by trade war fears this year as higher tariffs could raise supply costs for the company and derail rebounding sales of the iPhone in China. The stock took a beating in May and August as the U.S. and China moved their trade battle to the next level.
Rosenblatt said earlier this month that based on its channel checks iPhone sales are shrinking 30% year over year in China, causing a wave of production cuts for Apple.
What helped the stock this year has been Apple’s effort to diversify its business away from iPhones into services and wearable devices. With the launch of Apple TV, Apple Watch and Airpods, the tech giant managed to offset some of the loss from waning demand for its smartphones. Enthusiasm for the upcoming 5G cycle has also lifted the stock.
Other than the concerns about iPhone sales, some analysts are also sounding alarms about Apple’s elevated valuation. The stock is current trading at more than 21 times forward earnings, according to FactSet.
“We worry: 1) Apple presently prices in significant EPS upside and 2) Further valuation improvement is unlikely to be a significant lever for stock appreciation after the rise in 2019,” Deustche Bank IT hardware analyst Jeriel Ong said in a recent note. The bank has a hold rating on Apple.