Apple is losing its luster as a safe haven in the tech bear market

Apple’s status as a relative haven in this year’s bear market is in jeopardy amid growing concerns that iPhone sales are slowing, pointing to further declines for broader tech stocks.

Over the weekend, the Cupertino, California-based company said the Covid-related lockdowns in China would mean shipments of its latest premium phones were lower than previously expected. Bloomberg News also reported that Apple expects to produce at least 3 million fewer iPhone 14s than originally expected this year due to weaker demand.

The stock rose 0.6 percent yesterday, bringing its year-to-date decline to 21 percent. The Nasdaq 100 index fell 32 percent.

Other big tech and internet stocks — including Microsoft, and Alphabet — are down between 32 percent and 46 percent.

Apple was the only megacap to rebound after its results this quarter, and the report kept analysts from slashing earnings estimates in contrast to widespread cuts elsewhere. According to UBS, the consensus for Apple is now too optimistic. That poses a risk for the market’s largest company at a time when it’s already trading at a premium to the Nasdaq 100.

Frank Funds chief investment officer Brian Frank called the lack of valuation cuts “a blinking red light” for investors.

“I see no reason why Apple’s valuations aren’t going down at the same rate as the tech as a whole, and since it’s trading at multiples of over 20, that seems like a massive risk,” he said.

“Given the global presence and the fact that consumers are facing a difficult environment due to inflation, I don’t see anything to be excited about. I think there is a lot more downside risk for megacaps.”

Analysts expect Apple to make $6.29 per share in 2023, an estimate that’s down just 2.6 percent over the past quarter. For comparison, estimates for 2023 fell 5.8 percent for Microsoft, 5.6 percent for Alphabet, and 14 percent for Amazon over the same period. Companies that supply Apple have also seen estimates cut. Skyworks Solutions’ forecast earnings for 2023 fell 11 percent last month, while Qorvo’s estimates fell more than 20 percent. Both reported last week.

Apple is trading at about 22 times estimated earnings, above its 10-year moving average of 17 and 19.7 times the Nasdaq 100. Should the consensus estimate continue lower and the denominator in the price-earnings equation shrink, Apple would see more expensive than currently.

“It’s overvalued compared to the rest of the tech, even if it has something to say for its cash flow and brand,” said Jim Worden, chief investment officer at Wealth Consulting Group. “The big question is how much growth could slow down as I think a recession will hurt Apple more than analysts are predicting.” Apple is losing its luster as a safe haven in the tech bear market

Fry Electronics Team

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