Apple Stock Decline Is It A Buy Now or Hold?

$Apple(AAPL)$

Apple Stock Is Finally Pulling Back — Is It Time to Buy?

Apple stock is finally coming down, and it’s catching everyone’s attention.

As of now, Apple is down 23% year-to-date and more than 17.5% over the past few months. This is one of the most significant pullbacks we’ve seen in a long time for what has traditionally been a market darling. And like many of you, I’ve had my eyes on Apple for years.

But here’s the thing—I’ve never owned it.

Why? Because it was always too expensive. Every time I looked at the fundamentals, the valuation just didn’t make sense to me. I skipped it over and over again, thinking “maybe next time,” and yet the stock kept going up. Year after year, it continued to trade at increasingly higher multiples, getting more and more overvalued. And every time it climbed, I had to sit there and say, “Well, maybe I missed it.”

But now—for the first time in a while—we're finally seeing Apple come back down to earth. And naturally, the big question on everyone's mind is: Is this a generational buying opportunity for one of the best companies in the world? Or is Apple still overvalued, especially given all the headwinds it's facing—like the new tariffs, margin pressure, and uncertainty around global manufacturing?

Let’s break this down.

What’s Driving the Decline?

One of the biggest catalysts behind Apple’s recent selloff is the massive increase in tariffs.

Tariffs on Apple products have jumped dramatically—from around 20%–22% to a jaw-dropping 145%. That number sounds unreal, but it’s what's being reported. And it's got Wall Street spooked. Some analysts are now projecting that if Apple passes on the full cost to consumers, an iPhone could cost as much as $3,500.

Now personally, I don’t think we’ll actually see iPhones hit that price. It would absolutely crush demand, and Apple knows that. But the broader concern is valid: if tariffs stay elevated, Apple will likely have to eat some of the cost, which puts pressure on its margins. And that’s one of the main reasons the stock is underperforming.

But before we panic, we need to remember one of Apple’s biggest strengths: brand loyalty.

Apple’s Moat: Ecosystem & Loyalty

Apple’s customer base is incredibly sticky. Once you’re in the Apple ecosystem—iPhone, iCloud, Mac, iPad, AirPods—it’s hard to leave. The products are seamlessly integrated, and the user experience is second to none. It’s not just about the hardware anymore; it’s the entire software and services experience.

Also, most consumers in the U.S. don’t buy iPhones outright. They’re usually financing them through monthly plans with carriers like Verizon, AT&T, or T-Mobile, paying something like $20–$30/month. That’s a huge psychological buffer. Even if prices rise, the monthly cost might only go up by a few bucks. That’s very different from someone having to drop $3,500 out of pocket.

So yes, tariffs will likely affect Apple’s margins, and to some extent, sales volume. But I don't believe it's going to be nearly as catastrophic as some of the most bearish predictions suggest.

Apple’s Strategic Response: U.S. Manufacturing

To mitigate these risks long-term, Apple is making serious moves to diversify its supply chain and bring some production back to the U.S. They’ve announced plans to invest around $500 billion over the next several years. That’s not a small number—it’s a massive commitment.

But this is not going to be a quick fix. It could take years before Apple is able to meaningfully shift production in a way that offsets the impact of tariffs. And in the meantime, the geopolitical tensions driving these tariffs don’t seem to be resolving anytime soon.

There are no signs of serious negotiations, and it feels like both sides are digging in their heels. So for now, we’re left in a state of uncertainty.

Valuing Apple in This Environment

Now here’s the thing—I'm not going to sit here and pretend that I can predict exactly how much Apple’s margins will shrink if tariffs stay at 145%, or exactly what iPhone pricing will look like two quarters from now. That would be speculation.

Instead, what I can do is take a rational approach and value Apple across a range of scenarios, using different PE ratios to account for best-case, base-case, and worst-case outcomes.

So we’ll look at:

• A conservative scenario where margins contract significantly due to tariffs.

• A base-case scenario where Apple finds ways to soften the blow and grow Services.

• And a bull case where tariffs ease up and the company regains operating leverage.

By using a range of potential earnings and multiples, we can estimate a fair value range and see where the current stock price fits within it.

But before I go into that model, let me quickly run through why Apple remains, structurally, a phenomenal business.

The Strength of Apple’s Fundamentals

Apple’s fundamentals are just outstanding:

• Return on capital is over 70% — incredibly high and a sign of excellent capital allocation.

• Net income margin is around 26.5% — very healthy for a hardware company, largely thanks to the growth of Services.

• Speaking of Services: Apple now generates $73 billion in gross profit from Services alone, out of a total of $184 billion. That’s nearly 40% of gross profits coming from high-margin, recurring revenue streams. That’s huge.

• The business is aggressively buying back stock, with shares outstanding dropping from 26.5 billion to 15.4 billion over time. That’s roughly 5–6% of the market cap being repurchased each year.

• Apple is sitting on $54 billion in cash and maintains one of the cleanest balance sheets among mega-cap companies.

This is not just a good company. This is a machine—and one of the best businesses in the world in terms of capital efficiency.

What About the Valuation?

Apple is currently trading at around 27x earnings. That’s a notable drop from the 35x multiple it carried at its recent peak. But let’s be honest—27x is still not cheap. Historically, this is somewhere near Apple’s average multiple over the last few years.

It’s not a deep discount. It’s not screaming “Buy me now!” But it’s also not ridiculously expensive anymore.

Now, if you’ve been around a while, you’ll remember that back in 2018, during the selloff, Apple traded at 13x earnings—and eventually went as low as 11x. That was a true bargain. Will we see those prices again? Probably not. But it’s worth keeping that history in mind as context.

Why I Regret Skipping Apple in 2019–2020—and What I’m Doing Now

Back in 2019 and 2020, I stayed away from Apple stock. I thought it was overvalued at 17–18 times earnings—yes, just 17–18 times. Looking back, that was clearly a mistake.

Apple went on an incredible run, and I missed a huge opportunity simply because I was too focused on the valuation and not enough on the business quality and momentum. But that mistake taught me a lot. It reminded me that with certain companies—elite brands with exceptional balance sheets and deep moats—you sometimes have to pay up a little to own a compounder.

But that was then. Let’s fast forward to today.

My Updated Valuation Approach for Apple (AAPL)

Right now, I’m building a new valuation model for Apple based on its current fundamentals and future earnings potential, factoring in both realistic growth assumptions and multiple scenarios for PE ratios. Here’s how I’m thinking about it.

Earnings Growth Forecast

I'm using Apple's expected earnings per share (EPS) growth over the next few years as the foundation of my model. Consensus expectations suggest:

• 7% EPS growth this year

• Followed by 11%, then 10.5%

• On average, I’m baking in a 10% annual EPS growth rate going forward

Now, why 10%? It’s a reasonable estimate if we assume:

• Apple continues to buy back 5–6% of its market cap annually, which it has been doing consistently

• Revenue continues growing at a modest 3–4% pace

• Margins hold relatively steady, even with some headwinds

So 10% EPS growth is a realistic best-case scenario, not a stretch.

Valuation Model: 5-Year Projection

For the base year, I’m using Apple’s expected EPS of $7.3 for this year.

If we apply 10% EPS growth annually for the next 5 years, we get an estimated EPS of $11.75 five years from now.

Now the next step is applying a reasonable PE multiple to that future earnings number.

Scenario 1: Apple Trades at 27x Earnings

Apple is currently trading at 27x earnings, which also happens to be its historical mean over the past few years. If that multiple holds, then:

• $11.75 EPS × 27 = $317 price target in 5 years

That’s a pretty solid outcome.

But here’s the thing—I’m not looking for a modest return. I aim to double my money over a 5-year period, which equates to about a 15% CAGR.

So I ask myself: At what price would I need to buy Apple today to double my money if it’s going to trade at 27x earnings in five years?

• The answer: $158 per share

That’s the maximum I’d be willing to pay today if I’m targeting a 2x return at a 27x exit multiple.

Scenario 2: Valuation Contracts to 23x Earnings

Let’s say things get more conservative—maybe tariffs stick around longer, consumer sentiment weakens, or Apple just doesn't justify a premium anymore.

If Apple trades at 23x earnings instead of 27x, that would bring the 5-year price target down to:

• $11.71 EPS × 23 = $269 per share

To still double my investment at that multiple, I’d need to buy Apple at $134 per share today.

What’s My Personal Buy Zone?

Based on the model, here's how I’m thinking about the stock:

• Fair Value Zone: $130–$155

  At $158: I start getting interested. It's a fair price assuming a 27x multiple and 10% EPS growth.

  Between $130 and $155: This is what I’d call the sweet spot—the zone where dollar-cost averaging makes a lot of sense, especially if you’re building a long-term position.

  Below $134: That’s where Apple becomes truly compelling even for conservative investors, pricing in potential multiple compression and macro headwinds.

But here’s the honest truth: I’m not dying to own Apple at these levels.

Apple is a phenomenal company, no question. But when I compare it to other tech names—Google trading at 16x with higher growth, or Amazon with accelerating earnings and better value metrics—the risk/reward profile just isn’t as attractive with Apple at $180+.

Conclusion: A Great Company, but Not the Best Deal Right Now

To be clear, I’m not bearish on Apple. It’s one of the most well-run companies on the planet. But for me to buy Apple, I need the valuation to match the quality—and right now, I just don’t think it does.

At $158, I’d consider starting a position. At $134, I’d be much more aggressive. Above $180, I’m just not interested—there are better opportunities elsewhere.

This is just my framework. I hope it helps you think more clearly about Apple, how to model your own buy zones, and what kind of return you’re really signing up for when you invest in a company like this.

So, is this a generational buying opportunity? Not quite. But is Apple starting to look interesting for long-term investors who have been waiting on the sidelines? Absolutely.

This is the first time in a long while that Apple isn’t outrageously expensive, and if you believe in the long-term durability of the brand, the strength of its services business, and its ability to adapt to global challenges—then this might be a moment to start nibbling or at least building a watchlist position.

Over the next few weeks, I’ll be updating my Apple valuation model based on different margin assumptions and PE ranges to give you a clearer view of what’s priced in—and what kind of upside might still be on the table.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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