Apple (AAPL -1.83%) has had a phenomenal run in 2023, with the stock rising about 50% year to date. However, that rise wasn't warranted, in my opinion. If you analyze Apple's business results for its fiscal 2023, they aren't great. In fact, if it were any company besides Apple, the stock behind the business would have likely declined.
As a result, 2024 could be a bumpy year for Apple shareholders, as the company enters the year with sky-high expectations but no execution behind it. So is Apple stock due for a crash in 2024?
iPhone sales were weak in 2023
When analyzing Apple, it's easier to break the company into two segments: iPhones and everything else. In its fiscal 2023 fourth quarter, which ended Sept. 30, iPhones accounted for 49% of Apple's sales. However, iPhone sales weren't strong this year.
| Period | iPhone Sales Growth |
|---|---|
| Fiscal Q4 2023 | 2.8% |
| Fiscal Q3 2023 | (2.5%) |
| Fiscal Q2 2023 | 1.4% |
| Fiscal Q1 2023 | (8.1%) |
Data source: Apple.
When sales of a company's flagship product are hardly growing, that's a problem, and that showed on the top line. Apple's total revenues declined year over year in every quarter of fiscal 2023.
The only bright spot in fiscal 2023 was its services division, which includes Apple TV+, advertising, Apple Care, Cloud Services, and all the revenue it accrues from sales in the App Store. Services segment sales increased every quarter, and rose 16% to $22.3 billion in the most recent one.
But services only amount to about a quarter of Apple's business, and that success didn't offset the weaknesses in sales of wearables, Macs, or iPads.
Still, revenue isn't everything when assessing a business. Profits matter too.
Apple is a master at optimizing its resources, and it did a great job of that. Though revenue declined 2.8% in fiscal 2023, its earnings per share slightly rose from $6.15 last year to $6.16 this year. But barely growing earnings isn't going to cut it, especially for a stock that trades at the premium Apple does.
Apple trades at massive premium despite little growth
So Apple's 2023 wasn't spectacular. Still, investors felt the need to slap a premium price tag on the stock.
AAPL PE Ratio data by YCharts.
When Apple traded above its current valuation in 2020 and 2021, its revenue growth supported the premium. Now that Apple's earnings ratio has returned to that level without the revenue growth, it doesn't.
This makes me believe that Apple stock is trading on borrowed time. If it cannot start growing sales, investors may lose their willingness to pay this premium for the stock, especially when there are many other choices out there that are both cheaper and growing faster.
But Apple didn't become the world's largest company without reason. It could launch an innovative, must-have product that substantially boosts sales and justifies the stock price. Or iPhone sales could rebound to kick-start growth again.
However, Wall Street analysts project 3.5% growth in its fiscal 2024 and 5.7% in its fiscal 2025, so they're not expecting much growth either.
In my book, Apple's stock is overvalued, and I'd look at other investment options rather than buying its shares.
