It's been a fun year so far for many investors. Shares of three of the biggest companies on the market -- Apple (AAPL +2.65%), Amazon (AMZN +0.34%), and Google parent Alphabet (GOOG +1.99%) (GOOGL +1.71%) -- have skyrocketed.
But could the fun soon come to a screeching halt? Maybe so. Here's why Wall Street thinks the joyride for Apple, Amazon, and Google (Alphabet) stocks could be nearly over.
Unspectacular outlooks
Wall Street has decidedly unspectacular outlooks for these top stocks. Sure, most analysts still recommend buying Apple, Amazon, and Alphabet. But there's more to the story.
The consensus 12-month price target for Apple is less than 1% above its current share price. That's not a bullish forecast, even though 33 of the 38 analysts surveyed by Refinitiv in June still rate the stock as a buy or strong buy.
NASDAQ: AAPL
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The picture isn't much better for Amazon. The average price target for the stock reflects an upside potential over the next 12 months of less than 6%. One analyst even slapped an "underperform" rating on Amazon with a price target more than 40% below its current price.
Wall Street is slightly more optimistic about Alphabet. The consensus price target for Google's parent is around 8.4% above the current share price. Considering that the stock has vaulted nearly 40% higher so far this year, though, that projected gain is relatively puny.
NASDAQ: GOOGL
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Multiple factors
Why are analysts not very enthusiastic about these stocks over the next 12 months? There are multiple factors at play.
Probably the biggest worry is that the stocks have soared so much in a short period of time. That's especially the case for Amazon, with its shares up by around 54% year to date. Wall Street seems to think there simply isn't much gas left to continue fueling impressive gains.
NASDAQ: AMZN
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Some analysts have company-specific reasons for their caution. For example, UBS analyst David Vogt downgraded Apple stock from buy to neutral earlier this month. Vogt sees "growth headwinds" for the iPhone maker.
Loop Capital's Rob Sanderson downgraded Alphabet stock from buy to hold in May. He expressed concern that the increased adoption of artificial intelligence (AI) сould hurt Google's business.
They might not say it out loud, but some on Wall Street could also expect that a U.S. recession is on the way. A recession would almost certainly take a toll on all three of these stocks.
Another perspective
Is Wall Street right that Apple, Amazon, and Alphabet stocks don't have much more room to run over the near term? Maybe so. It wouldn't be surprising for any or all of these stocks to pull back after their tremendous gains.
There's another perspective to consider, though. Even if these stocks don't climb much higher over the next 12 months, they could still deliver huge returns over the next decade and beyond.
Earnings growth could put the valuations of these high-flying stocks in a new light. AI could (and I'd argue will) provide a major tailwind over the long term for Apple, Amazon, and Alphabet. I think that Loop Capital's Sanderson could be underestimating how much Google Cloud could benefit from the AI boom, and overestimating the negative impact on Google Search.
While several economists are predicting a recession, most of them expect it to only be a mild one. All three of these stocks should recover quickly after a downturn. And it's still possible that the recession won't actually materialize.
Perhaps Apple, Amazon, and Google stocks will take a pit stop. But I think that their joyride is far from over.
