Apple’s (NASDAQ:AAPL) shares surged to a new all-time high last Thursday, marking a 50% gain this year, driven by confidence in its ability to generate substantial profits irrespective of economic conditions. However, despite four consecutive quarters of declining revenue, the company faces emerging challenges that may hinder its record-setting trajectory.
As the world’s most valuable publicly traded company, Apple encounters new obstacles in 2024. In China, which contributes 20% of its revenue, governmental crackdowns on foreign-made devices are underway. Intensifying competition from Huawei Technologies Co., particularly with the unveiling of its Mate 60 Pro smartphone, poses additional challenges. Furthermore, a potential U.S. ban on Apple’s smartwatch business looms due to a pending patent dispute just days before Christmas.
This year’s rally has elevated Apple’s valuation to high levels. Priced at 29 times projected profits for the next year, it is nearly double its 10-year average valuation. With stretched valuations, any future rally in Apple is likely to hinge on accelerated profit growth. Analysts foresee a +3.7% revenue growth and +7.6% profit expansion in fiscal 2024. Accuvest Global Advisors, having reduced its position in Apple and other megacap tech stocks, highlights the risk of money shifting to other investments as valuations reach their limits.
Despite most investors favoring megacap tech stocks amid rising interest rates, the shift toward riskier assets signals changing market dynamics. Apple’s recent record surge has prompted caution among analysts, reflected in its 34 buy-equivalent ratings, compared to 67 for Amazon.com, 65 for Meta Platforms, and 59 for Nvidia.
However, not all analysts are bearish on Apple. Wedbush Securities projects a $4 trillion market value for Apple by the end of next year, setting a 12-month price target of $250, surpassing the $199 average expected by analysts. Accuvest Global Advisors maintains that Apple’s challenges don’t diminish its belief in the iPhone’s unparalleled consumer appeal, justifying a “higher multiple.”
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Author Stephanie Bédard-Châteauneuf 
