After 2019's Mega-Rally, Is It Time To Sell Apple?

After seeing the value of their holdings doubled during the past year, one logical question for investors in the shares of Apple (NASDAQ:) is whether it’s time to take some risk off the table and reduce their holdings of this mega tech stock?

The proponents of this call have a point to make. The stock has surged more than 100% in the last 12 months to hit another record high on Friday, closing at $310.33. Indeed, Apple’s gains are now the largest among the group of top five tech giants that includes Amazon.com (NASDAQ:) and Google’s owner Alphabet (NASDAQ:).

Apple Monthly Price Chart

For the first time since 2011, shares of the iPhone maker have been trading at a higher price-earnings ratio than the after the stock’s valuation almost doubled in 2019. It’s a reversal from the previous nine years, when concerns over a lack of product innovation kept the stock at a persistent discount to the market.

After a powerful rally in 2019, Apple is trading at 26 times last year’s earnings, the highest level since 2008. That compares with a multiple of 24 for the S&P 500. The magnitude of Apple’s current rally has raised concerns that the stock is due for a correction.

At yesterday’s price, the stock is trading more than 12% higher than analysts’ average price target. Seven of the 49 analysts tracked by Bloomberg that cover Apple have sell ratings, the most in at least nine years.

Apple Investors Ignoring Bearish Case

Despite these concerns, Apple’s persistent strength shows that investors have started to ignore a bearish scenario which calls for avoiding the company because its growth is too dependent on iPhones. The flagship product still contributes to about half of the total sales, making the business vulnerable to a shift

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