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AAPL is Trading at a Premium at 36.15X P/E: Is the Stock Still a Hold?
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Key Takeaways
AAPL trades at 36.15X forward P/E versus the sector's 17.48X, raising valuation concerns.
AAPL shares gained 30.6% YTD, fueled by robust iPhone demand and growing AI capabilities.
Rising memory costs and supply constraints threaten Apple's margins.
Apple (AAPL - Free Report) shares are overvalued, as suggested by a Value Score of F. The AAPL stock is trading at a forward 12-month price/earnings (P/E) of 36.15X compared with the broader Zacks Computer & Technology sector’s 17.48X. Apple shares are trading at a premium compared with peers, including Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) . Shares of Alphabet, Microsoft and Amazon are trading at a P/E multiple of 19.17, 24.49 and 24.22, respectively.
AAPL Stock’s Valuation
Image Source: Zacks Investment Research
Is Apple worth buying at current prices? Let’s dig deep to find out.
Strong iPhone Sales & Services to Boost Apple’s Prospects
Apple shares have appreciated 30.6% year to date (YTD), outperforming the broader sector’s return of 8.9%. The stock has outperformed Alphabet, Microsoft and Amazon over the same time frame. Shares of Amazon and Microsoft have returned 15.9% and 8.2%, respectively, YTD, while Alphabet drops 4.2%.
Apple Stock’s YTD Price Performance
Image Source: Zacks Investment Research
The outperformance reflects investor optimism surrounding robust iPhone demand, accelerating hardware innovation, expanding artificial intelligence (AI) capabilities and continued growth in the high-margin Services business. In the fourth quarter of fiscal 2026, iPhone revenues jumped 17% year over year to $57.6 billion, driven by strong customer demand despite supply constraints. The company achieved September-quarter revenue records for iPhone and registered record upgrades worldwide, including in the United States, Mainland China and India. The launch of iPhone Duo, alongside iPhone 18 Pro and Pro Max, has strengthened Apple’s product portfolio and created additional upgrade opportunities.
Apple’s growing investments in AI are expected to support its long-term prospects. Siri AI, which integrates personalized assistance, contextual awareness and privacy-focused processing, could encourage customers to upgrade to newer devices. The company also plans to monetize advanced server-based AI capabilities by offering expanded access to users requiring greater processing capacity. Increasing adoption of Apple Intelligence across iPhone, Mac and iPad could create incremental subscription revenues and strengthen customer engagement.
Apple’s expanding Services business remains a significant long-term catalyst. The company’s installed base of more than 2.5 billion active devices provides a substantial opportunity to increase adoption of Apple Pay, iCloud+, Apple Music, Apple TV and advertising services. The expansion of iCloud+ packages to include Apple TV and Apple Arcade in more than 100 countries and regions could attract additional subscribers. Apple’s introduction of Apple Pay in India and advertising on Apple Maps also creates new monetization opportunities.
AAPL Suffers From High Memory Cost & Supply Chain Constraints
Increasing component costs represent a significant challenge for Apple’s prospects. The company expects gross margin to decline to 45-46% in the first quarter of fiscal 2027 from 47.9% in the fourth quarter of fiscal 2026, primarily due to rising memory prices and Siri AI-related expenses. Apple expects memory costs to increase further beyond the December quarter, potentially pressuring profitability.
Apple continues to face supply constraints across its product portfolio. In the fiscal fourth quarter, limited availability of advanced semiconductor manufacturing capacity affected iPhone, Mac and iPad shipments. Although advanced-node constraints are easing, memory shortages are expected to affect Mac and iPad availability in the December quarter.
Increasing regulatory scrutiny of Apple’s App Store business model and third-party licensing arrangements presents long-term risks. Apple expects Services revenue growth to moderate to 8-9% in the first quarter of fiscal 2027 from 10% in the preceding quarter, reflecting licensing-related and foreign-exchange headwinds. Persistent regulatory pressures and evolving competition are expected to challenge the sustainability of Services growth.
The Zacks Consensus Estimate for Apple’s fiscal 2027 earnings has decreased by 8 cents to $9.45 per share over the past 30 days, indicating 7.1% growth from the figure reported in fiscal 2026.
The consensus mark for Apple’s fiscal 2027 revenues is pegged at $526.45 billion, indicating 10% growth over the figure reported in fiscal 2026.
Conclusion
Strong iPhone demand, expanding Services business and growing AI capabilities are expected to support Apple’s long-term growth prospects. The company’s extensive installed base and continued product innovation provide opportunities for sustained revenue growth. However, rising memory costs, supply chain constraints, regulatory uncertainties and moderating Services growth remain concerns. Moreover, downward earnings estimate revisions and a premium valuation compared with the broader sector and peers limit the stock's near-term upside potential. Although Apple’s solid fundamentals and AI-driven opportunities remain encouraging, its elevated valuation warrants caution. Investors may prefer to wait for a more attractive entry point before accumulating AAPL shares.
View the Zacks #1 Rank List
Image: Bigstock
AAPL is Trading at a Premium at 36.15X P/E: Is the Stock Still a Hold?
Key Takeaways
Apple (AAPL - Free Report) shares are overvalued, as suggested by a Value Score of F. The AAPL stock is trading at a forward 12-month price/earnings (P/E) of 36.15X compared with the broader Zacks Computer & Technology sector’s 17.48X. Apple shares are trading at a premium compared with peers, including Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) . Shares of Alphabet, Microsoft and Amazon are trading at a P/E multiple of 19.17, 24.49 and 24.22, respectively.
AAPL Stock’s Valuation
Image Source: Zacks Investment Research
Is Apple worth buying at current prices? Let’s dig deep to find out.
Strong iPhone Sales & Services to Boost Apple’s Prospects
Apple shares have appreciated 30.6% year to date (YTD), outperforming the broader sector’s return of 8.9%. The stock has outperformed Alphabet, Microsoft and Amazon over the same time frame. Shares of Amazon and Microsoft have returned 15.9% and 8.2%, respectively, YTD, while Alphabet drops 4.2%.
Apple Stock’s YTD Price Performance
Image Source: Zacks Investment Research
The outperformance reflects investor optimism surrounding robust iPhone demand, accelerating hardware innovation, expanding artificial intelligence (AI) capabilities and continued growth in the high-margin Services business. In the fourth quarter of fiscal 2026, iPhone revenues jumped 17% year over year to $57.6 billion, driven by strong customer demand despite supply constraints. The company achieved September-quarter revenue records for iPhone and registered record upgrades worldwide, including in the United States, Mainland China and India. The launch of iPhone Duo, alongside iPhone 18 Pro and Pro Max, has strengthened Apple’s product portfolio and created additional upgrade opportunities.
Apple’s growing investments in AI are expected to support its long-term prospects. Siri AI, which integrates personalized assistance, contextual awareness and privacy-focused processing, could encourage customers to upgrade to newer devices. The company also plans to monetize advanced server-based AI capabilities by offering expanded access to users requiring greater processing capacity. Increasing adoption of Apple Intelligence across iPhone, Mac and iPad could create incremental subscription revenues and strengthen customer engagement.
Apple’s expanding Services business remains a significant long-term catalyst. The company’s installed base of more than 2.5 billion active devices provides a substantial opportunity to increase adoption of Apple Pay, iCloud+, Apple Music, Apple TV and advertising services. The expansion of iCloud+ packages to include Apple TV and Apple Arcade in more than 100 countries and regions could attract additional subscribers. Apple’s introduction of Apple Pay in India and advertising on Apple Maps also creates new monetization opportunities.
AAPL Suffers From High Memory Cost & Supply Chain Constraints
Increasing component costs represent a significant challenge for Apple’s prospects. The company expects gross margin to decline to 45-46% in the first quarter of fiscal 2027 from 47.9% in the fourth quarter of fiscal 2026, primarily due to rising memory prices and Siri AI-related expenses. Apple expects memory costs to increase further beyond the December quarter, potentially pressuring profitability.
Apple continues to face supply constraints across its product portfolio. In the fiscal fourth quarter, limited availability of advanced semiconductor manufacturing capacity affected iPhone, Mac and iPad shipments. Although advanced-node constraints are easing, memory shortages are expected to affect Mac and iPad availability in the December quarter.
Increasing regulatory scrutiny of Apple’s App Store business model and third-party licensing arrangements presents long-term risks. Apple expects Services revenue growth to moderate to 8-9% in the first quarter of fiscal 2027 from 10% in the preceding quarter, reflecting licensing-related and foreign-exchange headwinds. Persistent regulatory pressures and evolving competition are expected to challenge the sustainability of Services growth.
AAPL’s FY27 Earnings Estimate Revision Shows Declining Trend
The Zacks Consensus Estimate for Apple’s fiscal 2027 earnings has decreased by 8 cents to $9.45 per share over the past 30 days, indicating 7.1% growth from the figure reported in fiscal 2026.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
The consensus mark for Apple’s fiscal 2027 revenues is pegged at $526.45 billion, indicating 10% growth over the figure reported in fiscal 2026.
Conclusion
Strong iPhone demand, expanding Services business and growing AI capabilities are expected to support Apple’s long-term growth prospects. The company’s extensive installed base and continued product innovation provide opportunities for sustained revenue growth. However, rising memory costs, supply chain constraints, regulatory uncertainties and moderating Services growth remain concerns. Moreover, downward earnings estimate revisions and a premium valuation compared with the broader sector and peers limit the stock's near-term upside potential. Although Apple’s solid fundamentals and AI-driven opportunities remain encouraging, its elevated valuation warrants caution. Investors may prefer to wait for a more attractive entry point before accumulating AAPL shares.
Apple currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.