Apple Stock Too Pricey? Analyst Warns Of Rising Competition, Tariff Risks, Favors 2 Tech Giants

An Apple Inc. AAPL analyst is moving to the sidelines with a downgrade on the stock, which has multiple headwinds, including competition, valuation, and earnings at risk from tariffs.

The Apple Analyst: Needham analyst Laura Martin downgrades Apple stock from Buy to Hold and withdraws a previous price target of $225.

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The Analyst Takeaways: With Apple trading at more than 26x forward price-to-earnings estimates and having major risks like competition, fundamentals and more, Martin downgraded the stock in a new investor note.

Martin said Apple's multiple is 50% above its 10-year average of 17x and is around 25% above the average S&P 500 p/e ratio for 2026 of 21x.

"We caution that AAPL has material risks to its revenue growth, margins, and valuation multiple, as described in this note," Martin said.

The analyst said Apple stock could drop by $20 to $30 per share based on technical, with only around $15 per share of upside if everything goes right.

Martin prefers Alphabet Inc GOOG GOOGL and Amazon.com Inc AMZN for the technology sector over Apple.

The analyst highlights that Apple's revenue growth and margins are the slowest among the big tech companies. A chart shows Apple's expected revenue growth of 3% in 2025 and 5% in 2026. That compares to Alphabet, with expected growth of 10% in 2025 and 11% in 2026, and Amazon's expected growth of 9% in 2025 and 10% in 2026.

"Most of the Big Tech competitors we cover have articulated a strategic vision that replaces AAPL's ecosystem. A key long-term strategic issue AAPL faces is that it can only use GenAI to improve its own ecosystem."

Martin said Alphabet can improve its Android ecosystem and its Cloud business can charge fees for other companies to use its LLM. The analyst said Amazon also benefits from having a large Cloud business that can collect a share of revenue for companies that build on its LLMs.

"AAPL does not own a Cloud business so this becomes a cost center, rather than a new rev and margin upside driver."

OpenAI is also named as a competitor with Martin highlighting the company's recent acquisition of Jony Ive's AI hardware startup. Ive previously spent 27 years with Apple helping design products like the iPod, iPhone, iPad, MacBook and Apple Watch.

"A collaboration between Ive and OpenAI threatens AAPL's dominance in design and user experience by a new well-funded competitor that owns a design team intimately familiar with AAPL's design philosophies and vulnerabilities."

Other concerns for Apple highlighted in the report include slowing smartphone demand, lower search default payments from Google, regulatory risks, and risks in China due to tariffs.

Martin said President Donald Trump‘s proposal to impose a 25% tariff on iPhones not manufactured in the U.S. could prove costly, given Apple's reliance on China for manufacturing.

"We estimate that 85% of iPhones are currently manufactured in China. This near-total reliance on China has become a strategic liability."

The analyst said the tariffs could lower Apple's earnings per share by 80 cents per share over the next 12 months.

Martin said the three things that would make her positive about Apple stock are an iPhone replacement cycle, a lower share price, and growing advertising revenue.

"We move to the sidelines for AAPL owing to its expensive relative valuation, increasing fundamental growth headwinds, and rising competitive threats."

AAPL Price Action: Apple stock is up 0.9% to $205.16 on Wednesday versus a 52-week trading range of $169.21 to $260.10. Apple stock is down 16% year-to-date in 2025.

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