Apple (AAPL) reported fourth-quarter earnings that bested analyst expectations on Wednesday, as a result of strong performance in services and its fast-growing wearables business. Although Apple’s iPhone business was down 9% year-over-year, the company signaled that it expected a substantial holiday quarter, and Apple stock climbed more than 1% in after-hours trading.
Is Apple (AAPL) Still a Good Buy?
Despite Apple’s strong performance however, Sacconaghi, a highly respected analyst, feels that the tech giant is overvalued in terms of performance metrics, and so investors need to be careful buying it at these levels.
“Well look I think there are two things at play here. One is, if you look to the valuation of Apple, it’s comfortably at a five-year high on all relative metrics. If you look at the last five years, which has been sort of the post hyper growth period for Apple, it trades at .8 times the market multiple. Right now it’s trading at 1.05 times a market multiple. So it’s 25% more expensive than it has been on average, and that’s pretty similar whether you look at it on a cash flow basis or on an earnings basis relative to the market. So they’re enjoying good things, but the stock is being rewarded for that. And I think one needs to be careful, more careful, when valuations are at elevated levels,” he added.
Sacconaghi is concerned by the strength of the current iPhone cycle, which has punished the stock in the past during times of weakness. He