Apple is 30 Percent Overvalued

apple overvalued iphone 12

“Apple is 30% too expensive!” That’s the latest prognostication from research firm New Street. It’s quite a prediction. After all, Apple (NASDAQ:AAPL) had a very good year. But New Street says that the stock is worth $90 compared to its recent trade just under $125.  It takes courage to be this bearish.

So, what exactly are New Street’s arguments? Analysts believe that the company’s strong sales for the iPhone 12 are likely unsustainable. Just because Apple could sell many phones in 2020 doesn’t mean this year has to be worse.  

Apple could always take it up a notch. It’s always been that way over the last few years. Otherwise, we wouldn’t be at a $2 trillion valuation right now. By the way, ten years ago it, was $321 billion. But New Street’s theory suggests that people are turning their capital elsewhere. Right now, things are loosening up. People are spending money on experiences again, not just electronics they can use locked up at home.  

That’s why New Street suggests that the new iPhone, which will presumably be some sort of slightly improved 12S, isn’t expected to lure people behind the stove. And as a result, the firm will likely sell fewer phones in the year ahead. How significant would this be? 

Can Apple Get By on Fewer Phones? 

If New Street’s assumption is correct, the research report says that Apple will ship fewer phones. So instead of the estimated 234 million iPhones, only about 180 to 200 million could be on the way. That alone would be a slight damper on sales. 

Demand for new models is probably also falling because the current versions are now attractive for longer. The cycle of how long an iPhone user owns a device is growing, which is another reason why not so many new smartphones are being bought. 

Look at the Weekly Chart 

The chart below proves the market is paying attention. However, we are not sliding down yet.  

Apple has made a lower high in the weekly chart. But there is still hope in the form of an upward trend line. As long as this line holds, we do not have to worry about a sell-off at Apple. 

Chart

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It would now be critical if Apple were to sustainably fall below the green line and form a lower low. In that case, we are talking about prices below $115. Then we would officially be in a downward trend, and prices around $90 would not be entirely out of the question. However, a huge amount would have to flow out of Apple shares by then. 

It is not impossible. The prices have already fallen from the all-time high of $145 to below $120. There are a lot of hurdles along the way to $90. The announcement of a double-digit target is quite daring. New Street is thus going entirely against the competition.  

In the last valuation, only one of 42 analysts had a bearish target. In total, 32 analysts had higher values in their sights. Incidentally, the analysts’ average target is currently around $157 for Apple. Almost a similar distance to the current prices as the $90 bearish call. We’ll see who wins. 

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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