To The Moon

Key Points

• Apple's revenue has been flat since 2022.

• The stock is near a recent valuation high.

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That's years of stagnant revenue, which isn't a great sign for a business. However, Apple is one of the best companies in the world, so that hasn't stopped it from growing its earnings through a combination of share buybacks and improving profitability. Still, there is only so much juice to squeeze when making a company more efficient, and Apple may be nearing its limit.

This leaves share buybacks as the primary way to grow earnings, but the effect of these repurchases may start to diminish. In the fourth quarter of fiscal 2024 (ended Sept. 28), Apple spent $25 billion on buybacks. But that occurred during a time when Apple was valued at near its highest point in five years.

This makes the share repurchases less effective because the company has to pay a higher price to repurchase its own stock. This reduces the program's effect on earnings-per-share (EPS) growth.

So, with two of Apple's primary ways to grow earnings potentially running out of steam, the conversation circles back to revenue growth, which Apple has struggled with over the past few years.

Expectations for Q1 aren't high

Fiscal Q1 encompasses the holiday quarter, and it will be a key moment for Apple to see if its iPhones and Apple Intelligence made a difference for consumers. Apple is seeing rising competition from Android phone makers, and this may weigh on Apple's results.

Wall Street analysts aren't expecting a lot from Apple in Q1, as they project 3.9% sales growth and 7.8% EPS growth. Investors may be highly critical of Apple even if it posts results that everyone expects.

So, should investors buy Apple stock before Jan. 30? I'd say no.

There isn't much optimism about Apple's business right now, and even if it reports a blowout quarter, the expectations are so high that Apple's stock likely won't budge. It trades for 32 times forward earnings right now, which is normally a level reserved for a company growing earnings and revenue at least in the mid-teens range.

Apple isn't anywhere close to that, so there's a lot of risk and not a ton of reward left in the stock. There are many cheaper alternatives with better growth than Apple, and investors should invest their money in those before buying Apple shares.