Apple Stock Is Upgraded After Google Antitrust Ruling. It’s Not a Buy Just Yet, Say Analysts.

Apple stock was upgraded to Neutral from Sell at MoffettNathanson with a $225 price target, up from $139. (Chris McGrath/Getty Images)

While the most pressing near-term risks to Apple stock may have dissipated, it doesn’t mean it’s time to buy shares of the iPhone maker.

Just ask MoffettNathanson analysts led by the firm’s co-founder, Craig Moffett, who upgraded shares of the tech giant to Neutral from Sell in a research note Thursday.

The analysts also hiked their price target to $225 from $139, a 62% boost. Apple shares were down 0.4% at $237.52 in premarket trading Thursday.

The analyst team noted that Apple has trailed the benchmark S&P 500 index since the start of the year, sometimes by as much as 25 percentage points. Following CEO Tim Cook’s trip to the White House on Aug. 6, shares have regained more than a third of that lost ground.

The worst-case scenario for tariffs appears to be off the table following months of speculation. The iPhone, Apple’s biggest money-maker — sales of which accounted for nearly half of net sales last quarter —has been exempted from all “reciprocal tariffs.”

While Apple is reliant on Chinese components and manufacturing for now, import volumes from countries like India and Vietnam have been rising. The firm noted that iPhones in-bound from India are currently levy-free. If Apple can divert product through other parts of Southeast Asia, “the tariff burden is not all that onerous,” MoffettNathason wrote.

The firm has reduced the assumed tariff burden in its model accordingly. “There’s certainly a risk that tariffs ratchet up, or the Trump administration just finds another way to get to the same place, but it increasingly feels like the tariff threat is, again, ‘manageable,’” the analysts wrote.

The latest development in the Google search monopoly case also came as a relief. Judge Amit Metha published his ruling in the remedy proceedings Tuesday, and it appears Apple is set to continue receiving multi-billion-dollar payments to make Alphabet’s Google the default search provider on its devices.

Still, there’s a reason the firm doesn’t recommend investors snap up the stock.

“The mere fact that these acute risks have receded doesn’t make Apple especially attractive from a valuation perspective,” analysts wrote. Based on consensus estimates aggregated by the firm, Apple is trading at nearly 31 times next year’s earnings, or a nine-point premium to the S&P 500.

“Five years ago, the US 10-year yielded less than 1%. It’s now within striking distance of 5%. And yet Apple’s EV / EBITDA multiple is 50% higher,” the analysts continued. “There can be no other conclusion than the market is counting on forward growth from Apple that trounces its recent historical record.”

Apple remains an expensive stock, and challenges related to the delayed rollout of new artificial-intelligence features haven’t dissolved just yet. But two things can be true at once. “As risks to fundamentals resolve, we don’t believe that a sell thesis solely supported by valuation concerns is justified,” the firm wrote.

Apple has its fair share of cheerleaders, but MoffettNathanson isn’t the only one on the fence. Fifteen of the 46 firms tracked by FactSet rate Apple at Hold. Of those who remain, 28 rate Apple at Buy or the equivalent, and three at Sell.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com