Apple's 'Decidedly Unattractive' Outlook Sparks a Rare Bearish Call

Shares of Apple Inc. have climbed significantly in recent months, but this upward momentum may not be as promising as it appears, according to MoffettNathanson analyst Craig Moffett. He argues that rather than a lack of news surrounding the company, the reality is that much of the recent news has been unfavorable for Apple.

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“There has been a great deal of Apple-relevant news,” Moffett wrote in a note to clients. “It’s just that all of it has been bad.”

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Although Apple’s stock has dipped about 2% in early 2025, it surged nearly 19% over the latter half of 2024, far outpacing the S&P 500’s performance during that period. Despite this impressive run, Moffett believes the stock’s valuation assumes only positive outcomes, which he finds problematic. As a result, he downgraded Apple’s stock from neutral to sell on Tuesday.

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“Apple’s growth rate is by far the lowest among the so-called ‘Magnificent Seven’ technology companies, yet it trades at the highest multiple,” Moffett explained. “Given this challenging backdrop, the outlook for Apple’s shares is, unfortunately, decidedly unattractive, in our view.”

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Moffett highlighted several developments he considers detrimental to Apple’s prospects. Among them is a ruling by Federal Judge Amit Mehta, who declared the payments Google makes to Apple to secure its position as the default search engine on Apple devices to be illegal. This decision could significantly impact a key revenue stream for Apple.

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Additionally, Moffett pointed to Apple’s weakening position in China, a critical market for the company. He also noted that Apple’s Vision Pro headset, which was already anticipated to underperform, has failed to meet even the low expectations set for it.

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Another potential headwind is geopolitical. While Apple may avoid tariffs from the Trump administration, Moffett warned that the company could face retaliatory actions from other nations targeting U.S.-based businesses.

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Beyond the outright negative developments, Moffett identified what he called “lukewarm” news that could prove even more damaging in the long term. Artificial intelligence was initially seen as a significant growth driver for Apple, but the company’s new AI features for the iPhone have failed to resonate with consumers.

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“Not only have we not seen any sign of an upgrade cycle—something that would be concerning enough on its own—but we have seen growing evidence that consumers are unmoved by AI functionality, not just Apple’s but also that of its competitors,” Moffett wrote.

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In light of these concerns, Moffett reduced his price target for Apple’s stock to $188, down from $202. This new target represents a 23% drop from Apple’s current trading levels. Apple shares were trading slightly lower during Tuesday morning’s session following the downgrade.

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Moffett also highlighted the growing disconnect between Apple’s valuation and that of the broader market. He observed that the valuation premium Apple enjoys relative to the S&P 500 has widened recently, despite diminishing justification for such a premium.

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“A valuation that was already rich got richer, even as the rationale for why it was rich has taken on water,” he commented.

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Moffett’s bearish stance on Apple is a minority opinion among Wall Street analysts. Of the 53 analysts tracked by FactSet who cover Apple, only three others share a bearish rating. However, Moffett’s analysis raises critical questions about whether Apple’s current valuation can be sustained amid the headwinds the company faces.

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Apple’s strong stock performance in recent months contrasts sharply with the challenges outlined by Moffett. From legal battles and geopolitical risks to disappointing product launches and underwhelming consumer adoption of AI features, the company appears to be navigating a series of hurdles. While many analysts remain optimistic about Apple’s long-term prospects, Moffett’s downgrade underscores the importance of evaluating whether the company’s premium valuation is justified in the face of these challenges.

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