Apple (AAPL) shares pulled back following a rocky week for markets as the Federal Reserve hinted at an earlier liftoff on interest rates for the year, but not before it became the first company to reach a $3 trillion market cap. According to Independent Solutions Wealth Management portfolio manager Paul Meeks, however, Apple stock is nowhere near a good deal right now.
“I think it's just a number,” Meeks told Yahoo Finance Live. “And I think that at $3 trillion market cap, even though Apple has been an iconic American tech company forever and ever — so impressive what they've done in the past — I think it's very expensive now as a tech investor, and I manage a lot of tech money for folks.”
And although Meeks said Apple remains one of the major players in the tech industry, it still does not rank among his top picks.
“You know, I have to own it, right? It's a big piece of my benchmark,” he added. “But among the tech names, large, medium, and small, it's not even on my best list. I think the stock is overpriced right now and significantly so.”
Meeks joined Yahoo Finance Live to discuss the latest developments in Apple’s valuation, NVIDIA’s (NVDA) merger with Arm, and other tech stocks. Independent Solutions Wealth Management LLC is a New York-based asset and private wealth management firm.
Meeks’ thesis that Apple is overvalued echoes that of other portfolio managers such as The Satori Fund‘s Dan Niles, who told CNBC in November that the company is the “most overpriced tech stock that exists.” Niles cited Apple’s skyrocketing market cap growth relative to the performance of its valuation multiples as being the primary indicator that its shares are overpriced.
Amid supply chain constraints plaguing the tech industry, Apple reached a $3 trillion market cap through the success of the iPhone as well as wearable accessories such as the Apple Watch and AirPods — which were among the hottest gift items this past holiday season. In addition, Apple continues to rake in revenue through services like AppleCare, the App Store, Apple Music+, and Apple TV+.
Meeks believes, however, that there are other companies that should be at the forefront of tech investors’ radars.
“So among the FAANGs, and with the FAANGs, I include Microsoft (MSFT). I probably would go with Alphabet/Google (GOOG/GOOGL) over the others,” he said. “And even beyond the FAANGs, I think some of the semiconductor and semiconductor capital equipment names might even be better positioned. And so I don't necessarily feel beholden to the FAANGs.”
Microsoft is another company that is positioned to reach the $3 trillion market cap milestone after hitting the $2 trillion mark in mid-2021. And as for his outlook on Google/Alphabet, Meeks said the opportunity for growth in the digital advertising space in 2022 is what makes Google and tech companies like it more attractive than the likes of Apple.
“And of course, Google — its Google platform is by far and away the winner there,” he said. “And I also think they're doing enough things in their other R&D that can all be big movers. And when I say big movers, [I mean] businesses that have over a billion in annual revenues and big operating profit in cash flow. So I do like the relative valuation of Alphabet.”
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV