Companies and Brands

Apple Shares Are Overpriced

Douglas A. McIntyre

Published: April 5, 2022 9:45 am

Apple Inc. (NASDAQ: AAPL) shares have been on an extraordinary run recently. The stock has risen 41% in the past year, and the path has been almost straight up. Apple’s market cap is $2.9 trillion, and many investors expect it to top $3 trillion soon.

Apple faces several problems, even though it had good earnings last quarter. Analyst John Donovan from Loop Capital recently posted that Apple cut its iPhone orders for the year by 9 million to 254 million. He expects another cut to as low as 240. He wrote: “Citing several factors such as the Ukraine-Russia war, supply chain disruptions, and other usual rationale, digging deeper we are uncovering some additional insights.” The supply chain issue will not go away soon. Apple faces slow production rates in China because of the latest COVID-19 lockdown.

Apple’s hardware is not its only problem. Its movie “CODA” won the Best Picture Oscar. However, its streaming subscriber count still trails those of industry leaders Netflix, Amazon and Disney+ by a wide margin. Its selection of content is thin, particularly compared to the thousands of movies and TV shows these competitors offer.

Wall Street is highly optimistic about Apple’s services businesses, and the extent these will add to Apple’s top line. However, in the most recent quarter, they were an extremely small part of revenue: $20 billion of the $124 billion total. This part of the company has a very long way to go before it becomes a substantial contributor.

As is true of most high-tech companies, Apple faces stiff regulation. The most recent evidence of this is the EU Digital Markets Act, which Fortune reports will “curb the dominance of major tech companies through a number of hefty sanctions and new restrictions including limits on data sharing and self-preference practices.”

Apple’s share price run is almost over.