Wall Street usually treats Apple like a sacred cow. You don't bet against the iPhone, and you certainly don't tell people to dump the stock of a company with a three-trillion-dollar market cap. But Craig Moffett isn't most analysts. When MoffettNathanson calls for Apple to sell, the financial world stops and looks for the nearest exit sign.
It’s a bold move. Honestly, it’s kinda rare to see a "Sell" rating on a company that basically prints money. Most big firms prefer the safety of "Neutral" or "Hold" because nobody wants to be wrong about Tim Cook. Yet, MoffettNathanson has been banging this drum for a while now, and their reasoning isn't just about a bad quarter or a glitchy software update. It’s deeper. It’s about a fundamental mismatch between what Apple actually is and what the stock market wants it to be.
The Valuation Trap Everyone Is Ignoring
Let's talk about the elephant in the room: the price tag. Apple isn't a high-growth startup anymore. It’s a mature, massive hardware company. But if you look at the P/E ratio, it’s trading like a software company that’s growing 30% a year.
Craig Moffett has been vocal about this. He pointed out that Apple has been trading at roughly 33x forward earnings while its revenue growth has been, well, sluggish. We're talking low single digits. If a utility company grew at 2%, its stock would be boring. Because it's Apple, the market gives it a "magic" multiplier. MoffettNathanson argues that the magic is wearing thin.
They isn't just being grumpy. The firm slashed its price target to $141 at one point, which is a massive haircut from where the stock usually sits. Why? Because the math doesn't add up. When you pay a premium price, you expect premium growth. If the growth is $2%$ and the price is $33 \times$ earnings, you’re basically paying for a future that might not exist.
Why the AI "Super Cycle" Might Be a Dud
Everyone is obsessed with "Apple Intelligence." The narrative is simple: everyone has an old iPhone, AI will make them want a new one, and boom—Super Cycle.
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MoffettNathanson isn't buying it.
They’ve described the AI rollout as "mostly a dud" in terms of driving immediate sales. It turns out, most people don't want to drop $1,000 just so their phone can summarize an email slightly better. Apple is also starting late. While Google and Microsoft have been in the AI trenches for years, Apple is still trying to figure out how to integrate LLMs without ruining the battery life or privacy of the device.
There's also the China problem. It's huge.
- Local Competition: Huawei is back with a vengeance.
- Sentiment: "Anti-American" sentiment in Chinese markets is real and it’s hurting sales.
- AI Integration: Apple has to figure out how to play by China's strict AI rules, which might mean their "Intelligence" features won't even work the same way there.
If China stalls, the whole Apple growth story stalls. That’s a massive chunk of their operating profit just... poof.
The $20 Billion Google Hole
This is the part that really scares the analysts. For years, Google has paid Apple billions of dollars to be the default search engine on Safari. It’s basically pure profit. No manufacturing costs, no R&D—just a giant check that shows up every year.
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Recent antitrust rulings have put that in jeopardy. Judge Amit Mehta’s ruling basically called these payments illegal. MoffettNathanson pointed out that these payments account for a staggering 25% of Apple's operating income.
Imagine losing a quarter of your profit because a judge signed a piece of paper. You can’t just "innovate" your way out of that overnight. If that revenue stream dries up, Apple's valuation looks even more insane. It’s like a house where the foundation is starting to crack, but everyone is still admiring the new paint job.
Tariffs and the Supply Chain Headache
Then there’s the geopolitical mess. Tariffs are the "lose-lose" choice according to Moffett.
Apple is stuck. They can either pay a fortune in tariffs on products coming from China, or they can spend a fortune rearchitecting their entire supply chain to move to places like India or Vietnam. Neither option is cheap.
Moving production to the U.S.? Forget about it. MoffettNathanson noted that the ecosystem in China employs millions at wage rates that just don't exist in America. Even India, which is the current "plan B," still relies heavily on Chinese parts. You can't just move a mountain.
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What You Should Actually Do
So, should you actually listen when MoffettNathanson calls for Apple to sell?
It depends on your timeline. If you’re holding Apple for the next 20 years, you’ll probably be fine. But if you’re looking at the next 12 to 18 months, the risks are piling up like a freeway multi-car pileup.
- Check the Multiples: If Apple is trading above $30 \times$ earnings and revenue is flat, be careful.
- Watch the DOJ: Keep a close eye on the Google search remedy phase. That’s the "hidden" risk that could tank the stock faster than a bad iPhone launch.
- Don't Believe the AI Hype: Wait for actual sales data, not just "sentiment" reports. If the iPhone 16 or 17 doesn't show a massive jump in units, the Super Cycle is officially dead.
The "Sell" rating is a wake-up call. It’s a reminder that even the biggest company in the world isn't immune to the laws of physics—or the laws of economics.
Next Steps for Investors:
Start by reviewing your portfolio's concentration in Apple. If more than 10-15% of your net worth is tied up in AAPL, consider rebalancing into sectors with higher growth-to-valuation ratios, such as specialized semiconductor firms or cybersecurity, which aren't facing the same regulatory headwinds. You should also set a hard "stop-loss" at a level you're comfortable with, perhaps 10% below current trading prices, to protect against a sudden correction if the Google payment revenue is officially struck down. Finally, read the full text of the most recent 10-K filing specifically for the "Risk Factors" section—it's where Apple has to be honest about the China and regulatory threats that analysts like Craig Moffett are highlighting.