Apple Inc. (AAPL): A Bear Case Theory

We came across a bearish thesis on Apple Inc. on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on AAPL. Apple Inc.'s share was trading at $254.43 as of September 23rd. AAPL’s trailing and forward P/E were 38.61 and 31.65 respectively according to Yahoo Finance.

Apple Inc., long regarded as the quintessential blue-chip and a staple of modern portfolios, is facing a fundamental transformation that challenges its reputation as an invincible growth engine. Despite a $3 trillion market capitalization and a legacy of innovation, Apple now exhibits the hallmarks of a classic value trap: a premium valuation disconnected from its deteriorating fundamentals.

The company trades at a P/E above 30 while projected revenue growth for fiscal 2025 and 2026 is a modest 6.3% and 4.8%, respectively, reflecting stagnation rather than the premium expansion investors expect. Its historically dominant iPhone business, which generates over half of total revenue, is faltering due to market saturation, lengthening upgrade cycles, and fierce competition, particularly in Greater China, where sales declined 11% year-over-year in Q1 2025 despite price adjustments. Other hardware categories, including wearables and accessories, show signs of saturation, while Mac and iPad growth remains inconsistent.

Apple’s innovation engine is similarly struggling. High-profile projects such as Project Titan were canceled after years of investment, and new initiatives like the Vision Pro have failed to achieve mass-market adoption. In AI, the company trails competitors, forcing a reactive approach that underscores its loss of technological leadership. Compounding internal challenges, Apple faces a coordinated global regulatory assault. U.S. antitrust actions, the EU Digital Markets Act, and Japan’s Mobile Software Competition Act threaten its Services division, which has been central to its high-margin growth, by targeting the walled-garden ecosystem that sustains its premium pricing.

Taken together, Apple’s stagnant core business, failing innovation pipeline, and regulatory pressures reveal a stark disconnect between valuation and reality. The market’s perception is anchored in past glories, masking the risks to future profitability and positioning Apple as a prime example of a value trap, with the potential for significant repricing as the fundamentals catch up.

Previously we covered a bullish thesis on Apple Inc. (AAPL) by Kontra in October 2024, which highlighted the sticky product ecosystem, steady iPhone replacement cycles, growth in services and wearables, and a strong cash return strategy. The company's stock price has appreciated approximately by 8.26% since our coverage. The thesis still stands, while Darius Dark Investing shares a contrarian perspective emphasizing stagnating growth, faltering innovation, and rising regulatory pressures challenging Apple’s premium valuation.

Apple Inc. is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 156 hedge fund portfolios held AAPL at the end of the second quarter which was 159 in the previous quarter. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HGTY and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.