Apple (AAPL) held its Worldwide Developer Conference (WWDC) last week, which most analysts found to be “underwhelming.” 

Unlike WWDC 2024, when AAPL stock soared after the company unveiled its “Apple Intelligence,” the market’s reaction to this year’s announcement was muted, and the stock fell 3.6% last week.

Apple is now down 20.8% for the year and is the worst-performing constituent of the “Magnificent 7” – very out of character price action for the Cupertino-based company.

Apple has also lost its crown as the largest company, as well as its $3 trillion market capitalization. It is now ranked third on the list of most valuable companies, trailing both Microsoft (MSFT) and Nvidia (NVDA). 

Apple Stock Forecast

Analyst sentiment toward Apple has soured this year, and just about half of the brokerages covering the stock rate it as a “Strong Buy.” The stock’s mean target price of $230.75 is 17.5% higher than Friday’s closing price, but the Street-low target price of $141 (via MoffettNathanson) represents downside of over 28%.

Apple’s Business Is Facing Serious Threats 

Analysts’ pessimism toward Apple is not hard to comprehend. The iPhone maker is battling several headwinds, many of which are quite deeply rooted. To begin with, the company has been stuck in this near-endless loop of single-digit top-line growth.

Since the iPhone, Apple hasn’t come up with any other product that has the opportunity to be the “next big thing.” If anything, there have been more hits than misses over the last decade. For instance, last year, it reportedly halted its electric vehicle project codenamed “Project Titan” after burning billions of dollars over a decade. Apple TV remains another vanity project and is reportedly in the red. Apple’s Vision Pro virtual reality (VR) headset has also failed to get much traction.

The race for the next big computing platform after smartphones appears wide open. OpenAI has also ventured into hardware and acquired Jony Ive’s startup, io Products. Ive was a former chief design officer at Apple, where he helped design the iPhone. The company is rumored to be developing glasses, a product that Meta Platform (META) CEO Mark Zuckerberg is also bullish on.

Apple is facing some serious competition in China, where domestic companies like Huawei have gained traction with their competitive models. To make things worse, Apple has been falling behind in the artificial intelligence (AI) race. That argument only gained momentum following WWDC, where the new features were not exactly groundbreaking and in many cases, Apple appeared to be playing catch-up with its competitors. For example, despite Siri having the first-mover advantage in the digital assistant space, it is still well behind AI assistants offered by the likes of OpenAI.

Apple’s lucrative and high-margin Services business is also under threat after District Judge Yvonne Gonzalez Rogers ruled that Apple needs to loosen its stringent App Store rules and stop collecting fees on purchases made outside apps. Apple had to reinstate the Fortnite App shortly after the ruling. Apple’s lucrative revenues from Play Store fees are at risk if more App developers start bypassing its payment ecosystem.

Should You Buy Apple Stock?

To be sure, while these are significant challenges, Apple still has a strong brand, customer loyalty, and wide moat. It has an installed base of over 2 billion devices, with a strong ecosystem which most users are hooked to. Also, while Apple’s growth in key markets like the U.S. and China has sagged, the company is looking at other markets, particularly India, to revive its growth.

Apple remains one of the most iconic companies despite all the challenges and is still the biggest holding for Berkshire Hathaway (BRK.B) for a reason. The key question that however needs to be asked is whether the stock is really worth a buy at 28 times its forward earnings. 

I personally find it tough to build a “buy” case for Apple at these valuations, given the company’s troubles. There is no easy fix to Apple’s woes, and the company now needs to come up with something really interesting to justify this valuation and shed the perception that it slackened on both innovation and AI in recent quarters.. Overall, while I continue to hold some Apple shares, I don’t find a compelling enough reason to buy more at these levels.