Should investors lose sleep at night because Apple (NASDAQ:AAPL) stock looks overbought?
Historically, betting against Apple hasn’t been a profitable trade. Even after booking huge gains in 2023’s first half, Apple’s shareholders will probably continue to enjoy decent returns in the coming quarters.
This doesn’t mean that the year’s second half will be mind-blowing like the first half was.
Admittedly, the pace of future returns might slow down somewhat. Apple remains a best-in-class technology company and we’re assigning Apple stock a confident “B” grade.
A Worry Wart’s Complaint About AAPL Stock
Here’s a headline that’s bound to raise some eyebrows. Hopefully, it won’t prompt investors to panic-sell their Apple shares. According to Fortune contributor Shawn Tully, “Now could be the worst time to buy” AAPL stock.
The author cited the cyclically adjusted price-to-earnings ratio, or CAPE ratio, which was developed by Robert Shiller many years ago.
As Tully explains, the CAPE ratio adjusts for cycles in earnings-related environments, such as when “earnings are either enjoying an unsustainable boom, or stuck in a temporary rut.”
Presumably, Apple would fall into the “unsustainable boom” category. There’s no denying the “boom” part. After all, Apple stock has rallied from $125 to $190 this year so far. But does Apple’s high CAPE ratio of 30.9x mean that the stock’s H1 2023 gains are “unsustainable”?
There are plenty of other valuation metrics, besides the CAPE ratio, that the worry warts could cite now. However, Apple has been overvalued for a while – several months at least – but the stock has continued to march upwards.
Apple stock just keeps on climbing the “wall of worry,” and it even seems to gain momentum from the bears’ fear.
Apple’s Investors Typically Win in the End
Instead of worrying about Apple’s valuation according to traditional metrics, consider this. As long as Apple continues to grow as a business, it can offer value to long-term investors.
That’s why Apple’s shareholders generally win in the end. Tully admitted that Apple’s inflation-adjusted EPS grew from $1.82 in fiscal 2013, to $3.75 in 2020. From there, it increased to $6.08 in 2021, and then $6.11 in 2022.
For growth-focused investors, that sustained pace of earnings growth suggests that Apple stock’s gains aren’t necessarily “unsustainable.”
There’s evidence that, despite the rise of inflation, shoppers have continued to buy iPhones in huge quantities.
Specifically, Apple’s iPhone sales in the United Kingdom surged to a record 1.5 billion pounds during the 12 months ending in September of 2022.
In the U.S., the iPhone’s market share reportedly increased from 49% 2022’s first quarter, to 53% in the first quarter of 2023.
No Need to Lose Sleep Over Apple Stock
In the final analysis, Apple has earned its place as a member of the “Magnificent Seven.” Apple stock is among the best-performing publicly listed technology stocks in 2023 so far.
Shoppers are still buying Apple’s products, and especially iPhones, in large numbers. The company’s long-term EPS growth has been outstanding.
Unless there’s negative sales or earnings data soon, there’s no compelling reason to worry about AAPL stock. So, we’re assigning the stock a “B” grade. The future returns should be decent for Apple’s shareholders, even after a powerful first-half-of-the-year rally.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.