Apple Inc. (AAPL) Stock: Wall Street Cuts Forecasts as Shares Tumble

TLDR

Table of Contents

Apple stock is down 12.8% year-to-date amid weak iPhone sales
Delays in Apple Intelligence AI features have led to executive shakeups
iPhone revenue declined 0.8% in the December quarter while Services grew 14%
Apple faces additional risks from potential tariffs and changes to its Google search deal
Current P/E ratio of 35x appears high compared to modest growth projections

Recent Performance Concerns

Apple stock has had a challenging start to 2025. Shares of the consumer electronics giant have fallen 12.8% year-to-date, closing at $218.27 on Friday.

The decline comes amid weak iPhone sales that have worried investors. The iPhone remains Apple’s flagship product, accounting for over 56% of total revenue.

: Wall Street analysts have recently cut their iPhone sales forecasts. This follows reports that Apple has delayed the rollout of its artificial intelligence features for smartphones.

These new AI features, branded as Apple Intelligence, were supposed to include an upgraded Siri digital assistant. The delays have caused internal turmoil.

Apple has reportedly shaken up its executive team in response to these struggles. One executive called the delays “ugly” and “embarrassing” since the company had been promoting AI capabilities in TV commercials, according to Bloomberg.

Product Updates and Regional Challenges

Despite iPhone challenges, Apple continues to refresh its product lineup. On March 5, the company announced new notebook and desktop computers.

The new MacBook Air features the M4 chip and offers up to 18 hours of battery life. Apple also launched new Mac Studio desktop computers with M3 Ultra and M4 Max processors.

Earlier, on March 4, Apple introduced a new iPad Air tablet with the M3 processor. The tablet comes in both 11-inch and 13-inch display sizes.

In late February, Apple announced the iPhone 16e, its new budget smartphone. It replaces the third-generation iPhone SE with a revamped design and improved technical specs.

Apple’s performance in Greater China remains concerning for investors. Sales in this key market fell 11% year over year during the fiscal first quarter.

On a positive note, Apple announced in February that it had chosen to partner with e-commerce firm Alibaba to bring AI services to its devices in China. Apple Intelligence in China will rely on Alibaba’s Qwen model.

Financial Results and Valuation Questions

In its fiscal first quarter ended December 28, Apple reported earnings of $2.40 per share. This represented a 10% year-over-year increase.

Revenue for the quarter reached $124.3 billion, up 4% from the previous year. Earnings per share topped analyst estimates of $2.35, while sales matched expectations.

However, iPhone sales declined 0.8% to $69.14 billion during the holiday quarter. This performance has raised concerns among investors about Apple’s growth trajectory.

Not all segments are struggling. Mac and iPad sales showed strong growth, jumping 16% and 15% respectively year over year.

Services revenue, which includes subscriptions and App Store sales, grew 14% to $26.3 billion. This represents Apple’s second-largest segment after iPhone, accounting for more than 21% of revenue.

For the current quarter, Apple has forecast total revenue growth in the low to mid-single digits. Analysts expect Apple to earn $1.61 per share on sales of $94.2 billion.

This modest growth outlook has caused some analysts to question Apple’s current valuation. The stock currently trades at approximately 35 times earnings.

This P/E ratio is down from around 40 at the beginning of the year but remains well above Apple’s historical average. Over the past decade, shares typically traded at a P/E multiple in the low twenties.

The premium valuation suggests investors expect accelerated growth ahead. However, Apple’s own guidance points to continued modest growth.

According to IBD MarketSurge charts, Apple stock is trading below both its 50-day and 200-day moving averages. This is considered a bearish technical sign.

Apple stock has an IBD Composite Rating of 85 out of 99, which combines five separate proprietary ratings of fundamental and technical performance. Its Relative Strength Rating stands at 57 out of 99.

Some analysts believe Apple’s successful pivot to artificial intelligence could justify its premium valuation. However, the current delays in rolling out AI features create uncertainty around this growth driver.

If AI fails to accelerate Apple’s revenue as investors hope, the continued success of the services business will become even more important to the company’s growth story.

Stay Ahead of the Market with Benzinga Pro!

Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders: