Craig Moffett Flips on Apple (AAPL): Sell to Neutral, But Valuation Remains High

A notable shift in Wall Street’s sentiment towards Apple Inc. (AAPL) has emerged as Craig Moffett, a prominent analyst at MoffettNathanson and one of the few remaining “bears” on the tech giant, upgraded his rating from “sell” to “neutral.” This adjustment signals a reassessment of the company’s risk profile amidst recent market performance and specific operational developments, prompting a broader recalibration of investor expectations.

• MoffettNathanson analyst Craig Moffett upgraded Apple Inc. (AAPL) from “sell” to “neutral.”
• This upgrade coincided with a significant 3.8% stock surge, marking its strongest single-day performance in over a month.
• Apple shares have appreciated over 19% in the last three months, despite a year-to-date loss.
• Moffett believes “the worst-case scenarios are off the table,” indicating reduced immediate downside risks.
• The company’s market resilience persists despite challenges like tariffs, AI competition, and declining China market share.
• A recent federal court ruling indirectly benefiting Google also provides a critical revenue tailwind for Apple.

Shift in Analyst Sentiment and Stock Performance

The upgrade coincided with a significant surge in Apple’s stock, which climbed 3.8% on Wednesday, marking its strongest single-day performance in over a month. This positive movement reflects a broader recovery trend, with shares appreciating over 19% in the last three months, despite a year-to-date loss of approximately 4.4%. Moffett’s revised outlook is underpinned by his assessment that “the worst-case scenarios are off the table,” indicating a perceived reduction in immediate downside risks for the iPhone maker.

Navigating Challenges and Strategic Advantages

This market resilience has largely disregarded several significant challenges facing the Tim Cook-led company, including the ongoing impact of tariffs, intensifying competition in the artificial intelligence sector, and a reported decline in market share within critical regions like China. However, a recent federal court ruling provided a tangible tailwind. The decision allowing Google to maintain its Chrome browser is indirectly beneficial to Apple, given that Google provides billions of dollars annually for its search engine to be the default option on iPhones, a critical revenue stream for the company.

Persistent Valuation Concerns

Despite the rating upgrade, Moffett maintains a cautious stance on Apple’s valuation. He notes that the tech behemoth’s shares trade at near 20-year highs, both in absolute terms and relative to the broader market. According to FactSet, Apple’s forward price-to-earnings (P/E) ratio stands at 32.36, considerably higher than the S&P 500’s multiple of 24.28. Moffett emphasized that “the mere fact that these severe risks have diminished does not make Apple particularly attractive from a valuation perspective.” His price target for Apple is currently set at $225, which suggests a potential downside of 5.6% from Wednesday’s closing price.

Broader Wall Street Outlook

This shift by MoffettNathanson leaves only two major firms with a “sell” rating on Apple, highlighting a broader convergence towards a more neutral or positive outlook across Wall Street. While significant operational risks appear to have receded, the debate surrounding Apple’s premium valuation and its ability to innovate against strong competition continues to shape investor sentiment.