While Apple (AAPL) is one of the most popular players in the tech space, regulatory concerns have been weighing on it and the stock looks overvalued at its current price level. So, we think it is better to bet on quality tech stocks, such as Broadcom (NASDAQ:AVGO) and SAP (SAP), that are trading at reasonable valuations and have plenty of upside remaining. Let’s discuss these names.Apple Inc.’s (NASDAQ:AAPL) market dominance in the tech space is unparalleled. Continued innovations and improving business fundamentals helped the stock advance by 45.9% over the past year to close yesterday’s trading session at $133.70. However, lately the company has been making headlines for all the wrong reasons. Democratic Representative David Cicilline, who is leading a push to pass new regulations for U.S. technology companies, said this month that AAPL would be prohibited under antitrust reform legislation from giving its own apps an advantage by preventing users from removing them on AAPL devices.
While the company has yet to resolve its case with ‘Fortnite’ creator Epic Games, its market dominance is being scrutinized by the Bundeskartellamt, Germany’s antitrust regulator, and a French court has set September 17 as the date for hearing a case against AAPL brought by the France’s finance ministry for allegedly abusive contractual terms imposed by the tech giant for selling software on its App Store. Given these developments, AAPL’s shares look overvalued at their current price. Their forward EV/S and P/S of 6.12x and 6.30x, respectively, are higher than the 4.26x and 4.03x industry averages. So, we think it’s better to wait for a better entry point in the stock.
However, we think investors seeking to capitalize on the renewed investors’ interest in the tech space could bet on quality tech stocks SAP SE (DE:SAPG) (SAP) and Broadcom Inc. (AVGO). They are trading at reasonable valuations and these stocks are expected to continue gaining in the coming months on their solid financials and impressive growth prospects.