Apple Jumps 18% in Three Months: Buy, Sell or Hold the Stock?

Apple AAPL shares have appreciated 17.6% in the past three months, outperforming the Zacks Computer and Technology sector, driven by a steady fourth-quarter fiscal 2025 outlook, iPhone 17 launch and strong U.S. investments (currently $600 billion) amid tariff-related headwinds. In September, the company updated its iPhone product line with the new iPhone 17, iPhone 17 Pro, and iPhone 17 Pro Max. The company also launched iPhone Air, its thinnest iPhone (5.6 mm) ever.

The updated iPhone portfolio is expected to boost iPhone sales, which increased 13.5% year over year to $44.58 billion and accounted for 47.4% of third-quarter fiscal 2025 total sales. Apple now expects the September quarter’s (fourth-quarter fiscal 2025) net sales to grow in the mid to high single digits on a year-over-year basis. The company expects the Services segment's year-over-year growth rate to be similar to that of the June quarter.

AAPL Shares Outperform Sector

However, tariffs are expected to have a negative impact of $1.1 billion in the fourth quarter of fiscal 2025. Apple expects a gross margin between 46% and 47% for the current quarter compared with a gross margin of 46.5% in the fiscal third quarter. 

Apple continues to play catch-up in the AI domain against Amazon AMZN, Microsoft MSFT and Alphabet GOOGL, which is expected to remain an overhang on the stock’s prospects. Year to date (YTD), Apple shares have edged down 2%, underperforming Microsoft, Alphabet and Amazon shares. While Alphabet and Microsoft shares have appreciated 25% and 21.3%, respectively, Amazon shares dropped 1.3%.

AAPL Shares Lag AI Competitors

AAPL shares are now trading above the 50-day and 200-day moving averages, indicating a bullish trend.

AAPL Trades Above 50-day & 200-day SMAs

Apple Intelligence and Services to Aid AAPL’s Prospect

Apple is benefiting from the growing adoption of Apple Intelligence that is infused across iPhone, Mac and iPad. A Services business that benefits from an expanding base of installed devices is expected to boost prospects.

In April, Apple expanded the availability of Apple Intelligence with iOS 18.4, iPadOS 18.4 and macOS Sequoia 15.4 updates in new languages, including French, German, Italian, Portuguese (Brazil), Spanish, Japanese, Korean and Chinese (simplified), as well as localized English for Singapore and India. By the end of 2025, Apple Intelligence will be available in eight more languages: Danish, Dutch, Norwegian, Portuguese, Swedish, Turkish, Chinese (traditional) and Vietnamese, driving growth opportunities.

Apple’s Services segment benefits from an expanding games portfolio and the growing popularity of Apple TV+. Apple’s strategy of adding new games on a continuous basis is driving its user base. Apple Arcade currently offers more than 200 games. At this year’s Worldwide Developers Conference, the company launched Apple Games, which enables players to enjoy all their games in one convenient place. Players can see all the games ever downloaded from the App Store for their iPhone and iPad, as well as games they have on their Mac. The Games app introduces challenges, a new way to compete with friends in score-based showdowns. 

Apple TV+ won 22 Emmys at the 77th Primetime Emmy Awards, best-ever in the streaming service’s history, driven by The Studio, Severance, and Slow Horses. Apple TV+ achieved a record-breaking 81 Emmy nominations this year, spanning 14 original titles.

The Zacks Consensus Estimate for fiscal 2025 Services sales is pegged at $108.29 billion, indicating 12.6% growth from the figure reported in fiscal 2024.

Apple’s Fiscal Q4 Estimate Revision Shows Declining Trend

The Zacks Consensus Estimate for Apple’s fourth-quarter fiscal 2025 earnings has decreased by a penny to $1.74 per share over the past 30 days, indicating 6.1% growth from the figure reported in the year-ago quarter.  
 

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

The Zacks Consensus Estimate for Apple’s fourth-quarter fiscal 2025 revenues is pegged at $101.27 billion, indicating 6.68% growth over the figure reported in the year-ago quarter.

AAPL Shares Are Overvalued

Apple’s stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

AAPL is trading at a forward 12-month price/sales (P/S) of 8.32X compared with the sector’s 6.73X, Amazon’s 3.01X and Alphabet’s 7.81X. However, Microsoft’s P/S of 11.37X is higher than that of Apple.

Apple Stock’s Valuation

Here is Why AAPL is a Hold Now

Apple’s iPhone sales are expected to benefit from the growing adoption of Apple Intelligence features. The company’s investments in expanding its manufacturing footprint in the United States are expected to help lower tariff-related headaches. Investors already holding AAPL shares should continue to do so based on these factors. However, stretched valuation and stiff competition in the AI domain are concerning for prospective investors.

AAPL currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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