“We note that Apple is not inexpensive & worry that EPS estimates for 2023 may be too high” – claims Toni Sacconaghi of Bernstein, as he looks out to what the future may hold for one of the world’s most valuable public companies.

The analyst highlights Apple’s (NASDAQ: AAPL) staggering historical tendency to outperform the broader market in the 3-month period ahead of new iPhone launches (between June and September) – “Apple has outperformed 14 of 15 years before iPhone launches” – but questions if 2022 is the year the trend finally breaks?

He sees several key concerns that may continue to hinder on the shares thru September 2022 and after:

1. Despite a major pull-back – AAPL is down close to 30% from highs of January 2022 – the stock is still “trading above historical levels on a relative basis (1.36x vs. 1.09x), and above other FAAMG names with higher growth.”
2. Potential economic downturn may have an outsized impact on the company that is “consumer centric, and is highly transactional, with less than 10% of its revenues and profits being recurring.”
3. Lastly, the analyst sees tailwinds of COVID-19 period potentially turning into major headwinds going forward: “we continue to believe that AAPL over-earned in FY 21 (and FY 22) amid work/learn from home, which could reverse, particularly as consumer spending priorities change.”

Bernstein does leave the room open for potential outperformance, citing current “generally cautious” investor sentiment, as well as Q3 estimates that “do not look unreasonable”, but concludes that on sum of all factors, “risk/reward over the next 6 months - 2 years is neutral to modestly negative.”

The analyst reiterates a “Market Perform” rating with $170 price target on the shares.

AAPL closed at $135.35 yesterday, down 26% YTD, but still up over 1% from this time one year ago.

By Vlad Schepkov