Apple Stock Too Pricey? Analyst Warns Of Rising Competition, Tariff Risks, Favors 2 Tech Giants

Core Viewpoint - An analyst has downgraded Apple Inc. from Buy to Hold due to multiple headwinds including competition, valuation, and earnings risks from tariffs [1][3]. Valuation and Earnings - Apple is currently trading at over 26 times forward price-to-earnings estimates, which is 50% above its 10-year average of 17 times and approximately 25% above the average S&P 500 p/e ratio for 2026 of 21 times [2]. - The analyst estimates that tariffs could reduce Apple's earnings per share by $0.80 over the next 12 months, given that 85% of iPhones are manufactured in China [8]. Revenue Growth and Competition - Apple's expected revenue growth is projected at 3% in 2025 and 5% in 2026, which is slower compared to competitors like Alphabet and Amazon, which are expected to grow at 10% and 9% respectively in 2025 [4]. - The analyst notes that most major tech competitors have articulated strategic visions that could replace Apple's ecosystem, with Alphabet and Amazon leveraging their cloud businesses for revenue growth [5][6]. Strategic Risks - The collaboration between Jony Ive and OpenAI poses a threat to Apple's design and user experience dominance, as it introduces a well-funded competitor familiar with Apple's design philosophies [7]. - Additional concerns for Apple include slowing smartphone demand, lower search default payments from Google, regulatory risks, and risks associated with tariffs in China [7][8]. Analyst Preferences - The analyst prefers Alphabet Inc. and Amazon.com Inc. over Apple in the technology sector due to the aforementioned risks and challenges [3].