Apple (AAPL 0.69%) is well-known for being a market-thumping investment in the past. However, in recent times, this hasn't been the case. Over the past 12 months, shares have climbed about 13%, falling short of the S&P 500's gain.
But the shares have been rebounding nicely, and they trade close to their all-time high. Maybe it's time for investors to ride the momentum. Where will this consumer discretionary stock be in one year?
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A fresh product lineup
Apple just released its lineup of iPhone 17 models. And according to Dan Ives of Wedbush Securities, demand appears to be stronger than it was for last year's iPhone 16 launch -- and that has led him to raise his price target on the stock to $310. If more consumers upgrade than expected, it will boost revenue numbers for the company.
Even though it's been 18 years since the iPhone was launched in 2007, this product line is still crucial to the company's success, as it represented 47% of total revenue in the third quarter (ended June 28). As revolutionary as this single device has been, investors are still right to temper growth expectations in the years ahead. It's very difficult to keep pushing up revenue from a base that's over $400 billion on a trailing-12-month basis.
The company also introduced its AirPods Pro 3, which with the iPhone 17 models, are all compatible with Apple Intelligence. Two new Apple Watch models were also announced.
Should the latest products and any new launches in the near term turn out to be hits, in addition to progress made with artificial intelligence efforts, the market could view the business in a more favorable light. And that can obviously be a boon for the stock price.
Watch the stock's valuation
The famous value investor Ben Graham is known for saying decades ago: "In the short run, the market is a voting machine. But in the long run, it is a weighing machine." The meaning is straightforward. It points to investors being influenced by news headlines, trends, and sentiment, which drives stock prices over 6 to 12 months. But over several years, it's a company's underlying fundamentals that matter most.
Turning our attention to Apple, it's clear that changes to the stock's valuation will have a huge effect on investor returns over the next year. That's because the valuation reflects Graham's voting machine just mentioned. And the valuation can change based on many factors, like new product/service launches, leadership changes, moves made by competitors, AI developments, and general market and economic sentiment. It's totally unpredictable how investors react to things.
It doesn't help that shares currently look expensive. They trade at a price-to-earnings (P/E) ratio of 38.8. That represents a 62% premium to the trailing-10-year average. It's probably safe for investors to assume that the P/E will stay the same or maybe even contract over the next 12 months.
The most important factors over the long term
The best way to invest is with a mindset that thinks about the next five years and beyond. Investors will quickly focus on Apple's key competitive advantage, which is the powerful brand that resonates so well with consumers across the globe.
Another thing to consider are the company's robust profits. It generates so much net income -- $84.5 billion through the first nine months of fiscal 2025.
Trends with Apple's brand strength and ongoing profitability are some of the most crucial factors that investors should focus on. That's true when considering the stock as a long-term investment, as these will drive business value.
But looking out between now and the fall of 2026, it's really anyone's guess where the stock will be. I wouldn't be surprised to see a 10% gain in the next year, matching the S&P 500's historical long-term track record.
