1 Stock I Wouldn’t Touch With a 10-Foot Pole, Even After the Market Sells Down

Even if Apple (NASDAQ:AAPL) Stocks fell during last week’s selloff to nearly 12% from their 2024 high (at Tuesday’s close), which wasn’t enough to make me want to buy them.

So why am I sour on a stock that so many others are bullish on? It’s all about evaluation.

Apple’s growth has been weak

If you live in the US, chances are you either have an iPhone or another Apple product, or know someone who does. Apple is slightly less dominant worldwide, but is still a very recognizable and popular brand.

Because Apple’s business is largely centered on high-end electronics, it is more prone to demand cycles than companies that sell less expensive electronics. As inflation took hold, Apple’s sales struggled.

Since the start of 2022, Apple has struggled to post double-digit revenue growth and even had a few quarters where sales were down compared to the year-ago period. Its latest quarter saw year-over-year revenue growth, but sales of its flagship product, the iPhone, fell slightly year-over-year.

The last two and a half years would have been a lot worse for Apple if it weren’t for the services division. This includes revenue from advertising, the App Store, cloud services and digital content such as Apple TV and Apple Music. Unlike its hardware revenue, which fluctuates, services have more of a subscription model feel to it, which is great for balancing the more cyclical side of the business.

But is it enough to justify buying the stock?

Figures do not add up for stock

Premium companies trade for premium ratings. Some companies have such great execution that investors are willing to pay for them. Apple has been in this position for some time, but I’d like to challenge that notion.

Its revenue growth has been weak, and while revenue growth has somewhat kept pace with the overall market, it’s still struggling to post double-digit growth.

With Apple approaching three years of uninspiring results, I’m confident it doesn’t deserve its premium.

At 32 times forward earnings and 33 times trailing earnings, the stock is as expensive as it was in early 2021. At the time, revenue was growing 50%, with earnings doubling year-over-year. Apple was worth the premium investors paid back then, but today’s Apple is not.

Its investors maintain that Apple Intelligence, the company’s generative AI product, will be a must-have and prompt consumers to upgrade to the latest iPhone. Since this feature can only be run on the latest generation of phones, it could cause an upgrade wave. But that’s not guaranteed and wouldn’t do much for the stock other than a one-time wave of demand.

The story continues

There are much better technology investments. Microsoft trades at roughly the same valuation, but has consistently seen double-digit revenue and earnings growth. Or you could look at meta platforms, which is cheaper and growing incredibly fast (22% revenue growth in the second quarter and 75% earnings growth).

Apple is too expensive and doesn’t perform well enough to justify its valuation. At these prices, there are far too many better companies to invest in and I think investors should put their money there.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Keithen Drury has positions in Meta Platforms. The Motley Fool has positions in and recommends Apple, Meta Platforms and Microsoft. The Motley Fool recommends the following options: long $395 January 2026 Microsoft calls and short $405 January 2026 Microsoft calls. The Motley Fool has a disclosure policy.

1 Stock I Wouldn’t Touch with a 10-Foot Pole Even After the Market Sells Off was originally published by The Motley Fool