Growth concerns keep dogging Apple (AAPL 3.10%). The Cupertino colossus abandoned plans to build its electric car, iPhone sales in China are drying up, and Apple even seems to have missed the boat on artificial intelligence -- to the extent it's had to ask Google for help). Share prices of Apple stock are down about $20 from recent highs hit in January.
But that's not necessarily bad news for new investors.
Up until recently, writes JPMorgan analyst Samik Chatterjee, investors "have ... been averse to the premium valuation" of Apple stock. But now that Apple's share price is a bit less premium, investors may be willing to give it a second look -- and once they do, they may like what they see.
Is Apple stock still a buy?
In a note published Thursday on StreetInsider.com, Chatterjee argues that Apple stock isn't worth the $215 he used to believe, but is still worth about $210 a share (a 20% upside from the current price) and still deserves an overweight (i.e., buy) rating. Curiously, a lot of the points he makes on Apple stock argue against buying Apple.
Take the revenue slowdown for example. With hardware sales stumbling, and growth in Apple's services businesses at risk of being hobbled by government anti-monopoly regulators, Chatterjee laments that Apple has "one of the lowest growth outlooks relative to the other Mega Cap Tech stocks" -- and he's right!
According to forecasts collated by S&P Global Market Intelligence, Apple's projected earnings growth rate of 10% over the next five years is just two-thirds as strong as the 16% growth rate projected for Alphabet, even slower than Microsoft's 17% rate, and less than half the 22% growth rate forecast for Amazon.
On the other hand, though, Apple stock at 27 times earnings is also cheaper than any of these other three tech giants (albeit it's neck and neck with Alphabet). That may argue in favor of Apple being at least a relative bargain in Big Tech. I just don't think Apple stock is cheap enough yet to justify a buy rating on its own merits.
