Apple Stock: The Stakes Seem Too High, Says Analyst

Considering its history and reputation, it might seem a bit weird to berate Apple (NASDAQ:AAPL) for a lack of innovation, but that’s what one Street analyst thinks might be holding the tech giant back right now.

D.A. Davidson analyst Gil Luria believes that Apple’s current stock price reflects high expectations for a substantial resurgence in growth. However, in the absence of a groundbreaking innovation, Luria does not foresee this scenario materializing anytime soon.

“We await Apple to get ‘unstuck’ on the innovation front in order to generate upgrade growth in its existing products and add through new products,” the 5-star analyst recently said. “While Apple has continued to introduce new form factors, especially within the wearables category, the handset and watch form factors have seemed to plateau over the last 3-4 years.”

Meanwhile, other forward-thinking companies are not only introducing novel form factors, such as AI pins and AR glasses, but are also pushing the boundaries of traditional handset designs with innovations like folding handsets. Although Apple currently maintains a strong grip on existing smartphone owners due to the robustness of its ecosystem, Luria thinks the company will need to demonstrate more creativity to attract and convert new consumers into the iOS ecosystem.

This becomes particularly crucial in “protected markets” like China, where domestic competitors enjoy certain advantages, and in lower price-point markets such as India. In these regions, Apple must make its product more compelling to sway consumers to allocate a more significant portion of their income, compared to the US.

But where can this innovation come from? New GenAI applications, of course. While the idea of a GenAI app store is less convincing, Luria believes Apple is in a “position to leverage an unparalleled walled garden consumer data set to provide new applications and experiences.”

However, Apple is not quite there yet, and for now, Luria assumed coverage on the stock with a Neutral rating and $166 price target, indicating Apple shares are overvalued by 8%. (To watch Luria’s track record, click here)

Looking at the consensus breakdown, 7 other analysts remain on the AAPL fence, 1 takes a bearish stance but with 22 positive reviews, the stock claims a Moderate Buy consensus rating. Going by the $202.50 average target, a year from now, shares will be changing hands for ~12% premium. (See Apple stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.