Text size

Apple’s rising stock is at “unreasonable” levels, an analyst wrote Monday.

Apple stock (AAPL), up 44% in 2019 through Friday’s close, was up 0.4% in recent trading at $228.02 as the S&P 500 was down slightly. Nomura Instinet analyst Jeffrey Kvaal on Monday reiterated a Neutral rating on the stock, boosting his price target from $185 to $205, below FactSet’s $226 average.

The shares trade at about 17 times Nomura’s latest estimate of fiscal 2020 earnings per share, $13, which is above FactSet’s current $12.68 average, according to Kvaal.

“Apple’s multiple is at a post-iPhone 6 high, which we consider unreasonable, given its slowing growth,” he wrote. A more appropriate multiple is at 15 times, according to Kvaal, who said that if the current multiple holds the shares would be worth $235, about 3% above Friday’s close.

Kvaal thinks demand for the company’s latest phones is solid, which—along with strong related revenue from wearables, services, and games—could mean investor focus will shift forward to the next device cycle when 5G networking technology may attract new buyers and upgraders.

But there are reasons to be wary, he wrote. “Conventional wisdom holds 5G will drive strong iPhone 12 replacement sales,” according to Kvaal. “We are not overly intrigued, given device/service pricing, historical precedent, and limited consumer benefit. 5G iPhones are likely to cost more, and we do not believe consumers are likely willing to pay about $200 more for 5G when 4G will suffice.”

Meanwhile, not all analysts are convinced of near-term strength for Apple, with Barron’s writing Friday that global economic issues may strain the company’s December quarter results.

Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison and follow Barron’s Next at @barronsnext.