Apple's (AAPL 0.96%) share price skyrocketed 93% in 2024. The iPhone maker continues to reign as the largest company in the world, with a market cap topping $3.5 trillion. Apple raked in $94.9 billion in revenue in its latest quarter -- a record level. Its active installed base of devices reached a new all-time high.
Everything appears to be going great for the consumer tech giant. But is it time to worry about Apple?
Here's what I mean.
NASDAQ: AAPL
Key Data Points
Potential warning signs
Several potential warning signs for Apple have emerged over the past year or so. I'll start with the most recent one. Last week, TF International Securities analyst Ming-Chi Kuo wrote in a post on Medium that iPhone shipments in 2025 could be up to 10% below consensus estimates. Kuo stated that iPhone shipments to China fell 10% to 10% year over year in December, adding that this reflected "a continued slide in Apple's Chinese market share."
He noted that iPhone shipments in the first quarter of fiscal year 2025 were "roughly flat YoY [year over year because of[ front-loading in January ahead of [Donald] Trump's tariff policy, while 2Q25 is expected to decline." This brings up another important concern: the impact of the incoming president's proposed stiff tariffs on Apple's business.
Kuo also mentioned an issue that others have highlighted in recent months. Apple Intelligence, the company's first generative AI functionality, seems to have been underwhelming to customers so far. This was a heavily hyped launch that some analysts thought would spark a multi-year upgrade supercycle. Perhaps Apple's fiscal Q2 results will support the view of Apple Intelligence as a significant tailwind. However, Kuo wrote, [T]here is no evidence of Apple Intelligence's ability to benefit hardware replacement cycles or service business."
Apple also experienced what I'd call a flop with its Vision Pro mixed-reality device. In June 2023, CEO Tim Cook claimed that Vision Pro marked "the beginning of a new era for computing." He compared the launch of the device to the introduction of the Mac and the iPhone.
However, Vision Pro doesn't appear to be contributing significantly to Apple's revenue despite the fanfare at its rollout. The company's latest quarterly results didn't mention the device, except once in a footnote in the "About Apple" section listing its products. Cook admitted to The Wall Street Journal's Ben Cohen that Vision Pro was "not a mass-market product" because of its high price tag of $3,500.
Then there's Warren Buffett. Sure, Apple remains the largest holding for Berkshire Hathaway. But Buffett has slashed Berkshire's position in the stock in recent quarters. Although he has called Apple a "wonderful" business in the past, it doesn't seem to be as wonderful in the legendary investor's eyes as it used to be.
The biggest knock against Apple
I think that the biggest knock against Apple is the company's valuation. Shares trade at nearly 31.5 times forward earnings. That wouldn't be too concerning if Apple was growing by leaps and bounds. But it isn't.
The company's fiscal Q4 sales rose 6% year over year. Wall Street expects similar revenue growth in full-year fiscal 2025. What about next year? Analysts aren't much more bullish. The consensus estimate is for revenue growth in fiscal 2026 of around 8%.
Maybe Apple's earnings picture will look much better. However, there's no reason to expect it right now. GAAP earnings declined year over year in fiscal Q4. The average analysts' estimate for fiscal Q2 is for adjusted earnings per share to rise 7.8%.
Time to worry?
Let's return to my perhaps surprising but serious question. Is it time to worry about Apple? My initial response would be "yes." After more consideration, though, I think the better answer is that it's too soon to worry.
Apple's iPhone-centered ecosystem remains solid with a highly loyal customer base. The company's financial position is strong. Those factors warrant a premium valuation to some extent.
It might seem that Apple has lost its innovative mojo with the arguably lackluster launches of Vision Pro and Apple Intelligence. However, Vision Pro's technological advancements are impressive. I suspect we'll see less expensive versions of the device and some of its technology show up in smart glasses in the future. I also think that Apple Intelligence could become much better over time, maybe even providing enough value to kick off the upgrade supercycle some anticipate.
I wouldn't bet on Apple delivering spectacular gains in 2025 as it did last year. On the other hand, I wouldn't bet against the possibility that stock will beat the market over the rest of the decade. I'm not going to worry about Apple -- at least not yet.
