While many people still own Apple (AAPL +2.65%) stock, I think it's time to let it go. The stock has been a stellar performer over the past decade, but all of its recent gains have been due to investors bidding up the stock, rather than actual business performance.
Apple produced some very lackluster quarters for the past three years, and there's no indication of any growth on the horizon. As a result, it's only a matter of time before the market corrects itself and sends Apple to a more reasonable price level.
iPhone sales haven't really done much over the past five years
Apple needs no introduction. It's one of the most popular tech brands globally, but especially in the U.S. The product ecosystem it built is second to none and captured many users.
However, Apple seems to be behind in one of the most important technological races yet: artificial intelligence. A large chunk of Apple's revenue comes from iPhones, and its AI feature, Apple Intelligence, leaves a lot to be desired compared to its Android competitors. This was evident in its first-quarter fiscal year 2025, which ended on Dec. 28, 2024. Apple's Q1 encompasses the all-important holiday quarter, when most iPhones are sold. If iPhone sales spiked in Q1, then it's clear that the latest launch was successful. If they stayed flat, then it's evident that the phone didn't bring anything new to the table.
Using this measure, it's safe to say Apple really hasn't moved the needle in some time.
| Year | iPhone Revenue |
|---|---|
| 2024 | $69.1 billion |
| 2023 | $69.7 billion |
| 2022 | $65.8 billion |
| 2021 | $71.6 billion |
| 2020 | $65.6 billion |
Data source: Apple.
Over a five-year span, Apple's iPhone revenue really hasn't gone anywhere. This gets even worse when you factor in inflation, as the $65.6 billion in iPhone sales during the holiday quarter in 2020 is equivalent to $79.5 billion in 2024 dollars.
So, on an inflation-adjusted basis, iPhone sales are down over the last five years. With iPhone sales making up 56% of sales, this isn't a good sign for Apple.
NASDAQ: AAPL
Key Data Points
Overall, Apple's revenue increased 4% year over year, but thanks to efficiency improvements, its earnings per share (EPS) rose 10%. This shows that even though Apple has no growth, management is doing a great job maximizing its profitability.
However, that kind of growth is essentially market-average, so the stock should trade at around what the broader market does.
Apple's stock has a premium valuation
While Apple's financial performance is essentially market-average, its stock is valued like that of the next biggest growth company.
Apple stock trades for a whopping 36 times trailing earnings and 31 times forward earnings.
AAPL PE Ratio data by YCharts. PE = price-to-earnings.
Compared to the S&P 500, which trades for 25.5 times trailing earnings and 22.3 times forward earnings, Apple has a premium of around 40% compared to the market.
Now, I'll buy the notion that Apple should command a premium due to its incredible brand value, but 40% is far too high a premium for just brand value.
There are far more attractive investments than Apple, as multiple companies trade for a cheaper price tag and have stronger growth than Apple. Here are just a few:
| Company | Forward P/E | Last Quarter Diluted EPS Growth |
|---|---|---|
| Nvidia | 26.2 | 111% |
| Taiwan Semiconductor | 22.2 | 54% |
| Meta Platforms | 27.6 | 52% |
| Salesforce | 30.2 | 35% |
| Alphabet | 22.4 | 21% |
| ASML | 29.4 | 30% |
Data source: YCharts.
All of these are far more attractive investment options than Apple and represent growth at a reasonable price.
As a final closing point, if you own an S&P 500 index fund, then you already have nearly 7% of the fund in Apple stock. That's a significant weighting already, and further exposure to a company that's not putting up spectacular results isn't a wise investment strategy.
There are far too many other promising companies out there to waste time with Apple as an individual holding. As a result, I think it's time to move on from Apple stock and focus on more promising areas.
