Apple investors just got some terrible news

Apple (AAPL 3.71%) shareholders are holding on to the successful release of the iPhone 16. Otherwise, the stock could be in trouble. Right now, Apple stock is trading at a premium despite its weak growth prospects, but the iPhone 16 could change all that.

However, Apple investors received some worrying news about the iPhone 16 and it could spell disaster for the stock.

iPhone 16 pre-orders are disappointing

TF International Securities analyst Ming-Chi Kuo monitors several key Apple suppliers to gauge iPhone pre-orders. The iPhone 16 was announced last week, making it the first weekend of available pre-order data, which is crucial in determining overall demand. For the past few years, iPhone demand has been pretty weak, with sales barely moving year-over-year. Unfortunately for investors, this trend is starting to move in the wrong direction.

According to Ming-Chi Kuo and his sources, iPhone pre-orders are down about 13% year-over-year. This is terrible news for Apple investors, as they needed a successful iPhone 16 launch to justify the current share price.

So is it time to panic sell? Not necessarily.

There are several factors at play. First of all, this is information from suppliers and may contain errors. If this information came directly from Apple, then it would be a different story. Second, part of the appeal of the new iPhone 16 is that it can run Apple Intelligence, Apple’s interpretation of generative AI. However, some of these features are not expected to be available until October, after the iPhone 16 will be available to the public.

So there is still hope that the iPhone 16 will be a successful launch, and I would caution investors to wait until this year’s holiday season is over before judging its success or failure.

But one thing is not up for debate: Apple needs the iPhone 16 to succeed.

Apple’s growth has been stalled for nearly two years

Apple is one of those stocks that trades based on its strong historical performance, not its current results. Since 2022, Apple has failed to register any significant revenue growth.

AAPL earnings data (quarterly annualized growth) by YCharts

Basically, Apple’s revenue is still below the peaks it hit in 2022, but the stock price has risen significantly since then. That’s partly due to improving profit margins and share buybacks boosting earnings, but the price investors have to pay for Apple stock has also risen.

AAPL PE ratio data (before) by YCharts

While investors used to buy stocks for somewhere in the mid-to-20s, or anticipated earnings, that’s no longer the case. At more than 32 times forward earnings, Apple shares trade at a substantial premium to the broader market’s 23.7 times forward earnings (as measured by S&P 500).

When a stock has that much of a premium to the broader market, it has to grow earnings quickly, which requires strong earnings growth.

While Apple Intelligence and the iPhone 16 were supposed to provide that to Apple, early signs show that this is not working. Once investors get more official data, that could trigger a bigger sell-off in stocks. Until then, Apple is still a very expensive stock trading on the promise of future success. There are other stocks that are much cheaper and have a clearer path to success than Apple, and investors should consider moving capital into them instead of Apple.