Apple Inc. Shows Mixed Performance Amid Rising Competition
Apple AAPL shares enjoyed a strong performance over the past year, primarily due to the promising launch of Apple Intelligence. Since the announcement on June 10, 2024, during the Worldwide Developers Conference, AAPL shares have surged by 29.6%. However, the company’s momentum faced challenges in early 2025, particularly with declining market share in China against local competitors such as Xiaomi and Vivo, according to recent data from Counterpoint Research, referenced by Bloomberg.
In 2024, Apple’s global iPhone shipments decreased by 2% compared to 2023, falling behind Samsung, which experienced a 1% growth. Conversely, Xiaomi saw substantial growth with a 12% rise in shipments. Overall, global smartphone sales increased by 4% year over year in 2024.
In response to stiff competition in China, Apple implemented rare discounts on the latest iPhone models from January 4 to January 7. Unfortunately, the absence of Apple Intelligence in Mainland China may hinder sales, despite the price reductions on high-end iPhones.
Recent Stock Performance of AAPL
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Can Apple’s Services Segment Drive Future Growth?
Apple’s Services division has emerged as a key growth driver, boasting over 1 billion paid subscribers—more than double from four years ago. The increase is largely due to the expanding content offerings of Apple TV+, Apple Music, and Apple Arcade, along with a growing user base for Apple Pay.
Though the company’s primary revenue still comes from the iPhone, the Services segment showed significant growth, with revenues up 12% year over year to $24.97 billion, accounting for 26.3% of total sales in the fiscal fourth quarter.
The Services segment benefits from heightened demand for Apple TV+ content and continued expansion of Apple Pay. Notably, Apple recently rolled out Tap to Pay on iPhone to additional markets, such as the U.A.E., Chile, Japan, Canada, Italy, and Germany, while Apple Pay became available in Egypt and Uruguay. The growing Apple TV+ content library is also a key point of interest.
The introduction of Apple Intelligence aims to enhance user engagement and experience across iPhone, iPad, and Mac platforms. This feature is available on the latest devices, including the iPhone 16 series and iPad models with M1 chips or later, while prioritizing privacy in user interactions.
Looking ahead, Apple expects revenue growth in the first quarter of fiscal 2025 to fall within the low to mid-single digits year over year. The Services segment is anticipated to grow by double digits, similar to its performance in fiscal 2024.
Stable Earnings Estimates for AAPL
The Zacks Consensus Estimate for Apple’s second quarter of fiscal 2025 projects revenues of $95.96 billion, reflecting a 5.74% increase from the prior year’s quarter.
Earnings estimates remain steady at $1.68 per share, indicating a growth of 9.8% compared to the previous year’s figures. Over the past four quarters, Apple has consistently surpassed the Zacks Consensus Estimate, with an average surprise of 5.05%.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Currently, AAPL stock shows signs of being overvalued, with a Value Score of F indicating a stretched valuation. The stock trades with a forward 12-month P/E ratio of 30.76X, surpassing the sector average of 26.62X and the median of 29.64X.
Current P/E Ratio
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AAPL shares are currently trading below their 50-day moving average, pointing to a bearish trend in the market.
AAPL Below 50-day Moving Average
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Apple’s current push into artificial intelligence with Apple Intelligence is significant; however, it trails behind competitors such as Microsoft MSFT, Alphabet GOOGL, and Amazon AMZN.
Despite the enhancement in the Services sector, exemplified by the growth of its content on Apple TV+ and Apple Arcade, potential delays in launching Apple Intelligence in key markets like China and India could negatively impact stock performance.
Given the circumstances, Apple’s near-term growth may not justify its premium valuation. Currently, AAPL holds a Zacks Rank #3 (Hold), indicating that it might be prudent to await a more favorable investment opportunity in the stock.
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