Even though Apple (NASDAQ: AAPL) stock dipped during last week’s sell-off to nearly 12% off its 2024 high (at Tuesday’s close), that wasn’t enough to make me want to buy it.
So why am I sour on a stock that so many others are bullish on? It all has to do with valuation.
Apple’s growth has been poor
If you live in the U.S., chances are you either own an iPhone or other Apple product, or know someone who does. Apple is a little less dominant worldwide, but is still a highly recognizable and popular brand.
Because Apple’s business is mostly centered on high-end electronics, it’s more prone to demand cycles than companies selling less expensive electronics. As inflation has taken its toll, Apple’s sales have struggled.
AAPL Revenue (Quarterly YoY Growth) Chart
Since the start of 2022, Apple has struggled to post double-digit revenue growth and even had a few quarters where sales dipped compared to the year-ago period. Its latest quarter saw revenue increase year over year, but sales of its flagship product, the iPhone, decreased slightly year over year.
The last two and a half years would have been much worse for Apple if it weren’t for its services division. This encompasses revenue from advertising, the App Store, cloud services, and digital content like Apple TV and Apple Music. Unlike its hardware revenue, which fluctuates, services has more of a subscription-model feel to it, which is great to balance out the more cyclical side of the business.
But is that enough to justify purchasing the stock?
The numbers don’t add up for the stock
Premium companies trade for premium valuations. Some companies just have such high execution that investors are willing to pay up for them. Apple has been in this position for a while, but I’d like to challenge that notion.
Its revenue growth has been poor, and while its earnings growth has somewhat kept up with the general market, it still struggles to post double-digit increases.
AAPL EPS Basic (Quarterly YoY Growth) Chart
With Apple approaching three years of uninspiring results, I’m confident it doesn’t deserve its premium.
AAPL PE Ratio…
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