Apple: OpenAI Wrecks The Bullish Thesis (Rating Downgrade)

(7min)

Summary

  • I am downgrading Apple Inc. to neutral due to looming generative AI smartphone competition from OpenAI, which undermines the premium valuation thesis.
  • Apple’s 28x earnings multiple is not justified, given slowing growth and potential disruption, especially compared to Alphabet’s lower multiple and similar risks.
  • Recent results showed steady growth, particularly in services, but tariff impacts and rising costs add near-term volatility.
  • I would reconsider AAPL stock if it traded at 18-20x earnings, but current risks and valuation make the risk/reward unattractive.
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Apple Store at 5th Ave in Manhattan, New York City

ozgurdonmaz

Apple Inc. (NASDAQ:AAPL) has been a controversial stock among investors, in part due to it perennially commanding a premium valuation in spite of having lower growth rates than mega-cap tech peers. I have on and off been bullish

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This article was written by

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Julian Lin is a financial analyst. He finds undervalued companies with secular growth that appreciate over time. His approach is to look for companies with strong balance sheets and management teams in sectors with long growth runways.

Julian is the leader of the investing group Best Of Breed Growth Stocks where he only shares positions in stocks which have a large probability of delivering large alpha relative to the S&P 500. He also combines growth-oriented principles with strict valuation hurdles to add an additional layer to the conventional margin of safety. Features include: exclusive access to Julian's highest conviction picks, full stock research reports, real-time trade alerts, macro market analysis, individual industry reports, a filtered watchlist, and community chat with access to Julian 24/7. Learn more.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of GOOGL, META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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