Investors shouldn't be surprised that Apple (AAPL 0.88%), one of the most successful businesses ever, has been a great addition to anyone's portfolio. The iPhone maker's share price has soared 1,000% in the past decade (as of Feb. 25).
After such a monumental gain, should you buy Apple stock right now?
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Apple has many beneficial attributes
You won't have a hard time finding reasons to like this company. Apple's latest financial results provide one example. Revenue jumped 16% year over year in the first quarter of fiscal year 2026 (ended Dec. 27). This gain was driven by strong demand for the iPhone, a critical financial contributor.
"iPhone revenue was $85.3 billion, up 23% year over year, driven by the iPhone 17 family," CFO Kevan Parekh said on the Q1 2026 earnings call.
Apple's impressive run of innovation, exemplified by consistently releasing in-demand products and services that consumers have an affinity toward, supports its brand moat. This is also helped by its premium market positioning, which results in high profits. Apple's net income margin was 29% last quarter.
It's that powerful combination of products and services that creates the company's ecosystem. Apple's offerings work seamlessly together. This introduces high switching costs for consumers, leading to customer loyalty.
Two headwinds to pay attention to
From a qualitative perspective, Apple is in an elite category. However, investors should be mindful of two key headwinds.
Growth is one factor to pay attention to. Over the past five years, Apple's diluted earnings per share increased at a compound annual rate of 11.1%. Between fiscal 2025 and fiscal 2028, Wall Street analysts' consensus view calls for this metric to rise at a yearly clip of 11.6%. Given Apple's massive size and wide adoption, the days of outsize high-teens growth are probably in the past.
Add that bottom-line perspective to the current valuation, and investors aren't necessarily staring at a rare buying opportunity here. Apple's stock trades at a price-to-earnings ratio of 34.7. Even for such a high-quality business, a lower starting valuation would be more compelling.
NASDAQ: AAPL
Key Data Points
Apple's return profile
The fact that Berkshire Hathaway trimmed a significant chunk of its Apple position while Warren Buffett was still CEO could be the only signal investors need to focus on. The Oracle of Omaha might believe that the consumer tech enterprise will produce mediocre returns going forward.
I expect Apple to generate a return that matches the S&P 500 index over the next five years. So, if you're after market-beating performance, then this stock isn't a worthy investment candidate. Should the valuation drop meaningfully, however, then the situation will become much more interesting.
