Apple, before this year a standout long-term performer in equity markets, faces a valuation increasingly disconnected from its core fundamentals. Instead of innovation or significant growth driving its stock, the company has relied heavily on financial engineering, particularly through massive share buybacks, to prop up its performance.
Chase Alexander for GuruFocus:
While Tim Cook’s capital allocation strategy has been highly effective, the benefit of buybacks diminishes when shares are richly priced, the fundamental issue with buybacks in this case is:
1. They rely on valuations being low enough to act as accretive to earnings (they no longer are at roughly 200 a share)
2. They mask underlying issues fundamental to the company by propping up the order book without real underlying demand. At current valuations, 30+ PE and effectively zero growth, not only is the valuation high, which limits the ability of the company to significantly reduce float through buybacks, there is effectively zero impact on EPS. A 30 PE is a significant premium to the greater market, while there is value to stable cash flows and effective capex, this on its own is really not enough, a 30 PE with zero growth is obscene.
This reference to zero growth is not an exaggeration, the company has not increased revenues meaningfully since 2022 (EPS is flat as well) and the company does not have the significant investment pipelines other mega-caps display. Service growth has also stagnated with significant focus on regulatory headwinds such as within the EU regarding App store policies and anti competitive processes.
The company seemingly has done nothing to expand within the artificial intelligence boom and as an extensive user of the Apple ecosystem, the company seems to have been left in the dust and has not offered any compelling reason to utilize any of its “tools” related in any way to industry megatrends.
MacDailyNews Take: For now, Teflon Tim’s protective coating is intact, but, at some point — yes, it’ll have to get even worse than shedding a quarter of share value in less than six months — Apple shareholders will en masse see behind the curtain and finally force what should’ve already happened years ago.
See also:
• Time to Think Different: Tim Cook’s leadership has run its course at Apple – June 20, 2025
• Tim Cook is not the best person to be CEO of Apple – April 2, 2019
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[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
It’s been “flat” for quite awhile…years, actually.
As US Treasuries became a questionable investment (Russian freeze-assets fiasco–major turning point), Mag 7 became a major “replacement” where foreigners parked their $$. It’s still a major $$ slot, but with the dissolution of the “one-worlder” paradigm, shifts away have occurred…Mag 7 are down materially.
AAPL has been deemed overvalued for a number of yrs. and the company’s AI confusion/paralysis, doesn’t assuage future concerns.
Heard a veteran macro analysis talk of how AI has obliterated his decades long use of the Bloomberg Terminal. Related to talk of AAPL’s possible Perplexity acquisition…he put this AI “engine” at the top of his user list. Not exactly sure how/if applicable to AAPL, but it’s at least a vote of confidence per options.
Long gone are the days when Apple was the ‘it’ company, where everyone waited in anticipation for any scrap of information regarding upcoming paradigm shifting products.
Sure still bring in $$Billions, but the excitement is missing.
Now merely another behemoth in the space….
January 2023 is my reference point since I bought in to TSLA to diversify a bit away from AAPL. I finally sold off Tesla for about a 100% gain but after much nerve-wracking ups and downs tied to Musk and the stock. In the meantime Amazon and Microsoft gained just as much without all the drama, and Meta is up about 500%! Meanwhile Apple is up about 50% since then… The AI megawave has passed Cupertino by and it’s growing smaller in the rearview mirror by the day.
It’s pretty much straightforward corporate finance. When you have free cash flow and can’t find any productive use for the money, you return it to stockholders or simply buy back shares. It really demonstrates that the corporation hasn’t or can’t find suitable investments that have the prospect of achieving a rate of return in excess of the corporate cost of capital. In other words, APPLE has lost its ability to innovate and grow.