Apple AAPL shares hit a 52-week high of $248.21 and eventually closed at an all-time high of $247.77 on Tuesday. AAPL shares’ outperformance can be attributed to its improving prospects courtesy the launch of Apple Intelligence, which is an advanced personal intelligence system seamlessly integrated into iOS 18.1, iPadOS 18.1 and macOS Sequoia 15.1.

Continued momentum in the Services business has been a key catalyst. It now has more than 1 billion paid subscribers across its Services portfolio, more than double what it had four years ago. The expanding content portfolio of Apple TV+, Apple Music and Apple Arcade, as well as growing user base of Apple Pay has helped in driving subscriber growth.

Apple Intelligence is designed to enhance user experience and productivity while prioritizing privacy across iPhone, iPad and Mac platforms. Apple Intelligence is now available for iPhone 16, iPhone 16 Plus, iPhone 16 Pro, iPhone 16 Pro Max, iPhone 15 Pro, iPhone 15 Pro Max, and iPad and Mac with M1 and later, with device and Siri language set to U.S. English.

Since the introduction of Apple Intelligence into Apple devices (Oct. 28), shares have appreciated 6.2%, outperforming the broader Zacks Computer & Technology sector’s return of 4.5%.

AAPL Stock's Performance

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Apple has been playing catch-up in the AI space with Alphabet GOOGL, Microsoft MSFT and Amazon AMZN, its peers in the “magnificent seven” group. Following the launch of Apple Intelligence, its competitive position is expected to improve.

Apple is set to bring new Apple Intelligence features in the upcoming versions of iOS 18.2, iPadOS 18.2, and macOS Sequoia 15.2. The features include Genmoji, ChatGPT in Siri, Image Playground, Visual Intelligence, Image Wand, Compose with ChatGPT, and language expansion with localized English support in Australia, Canada, New Zealand, South Africa and the U.K.

Services Business: Key Catalyst for AAPL Stock

Although Apple’s business primarily runs around its flagship iPhone, the Services portfolio has emerged as the company’s strong growth driver. In the fiscal fourth quarter, Services revenues grew 12% year over year to $24.97 billion and accounted for 26.3% of sales.

The Services business benefits from the growing demand for Apple TV+ content and the adoption of Apple Pay. It recently expanded Tap to Pay on iPhone to more markets, including the United Arab Emirates, Chile, Japan, Canada, Italy and Germany. Apple Pay is now available in countries like Egypt and Uruguay.
 

AAPL is expanding its retail footprint with the latest announcement of launching the Apple Store online in summer 2025 in the Kingdom of Saudi Arabia. Beginning in 2026, Apple will begin opening the first of several flagship Apple Store locations in Saudi Arabia.

Expanding content portfolio for Apple TV+ is noteworthy. Apple Originals has won nine Golden Globe nominations, including Slow Horses for Best Drama, this year. The growing popularity of shows, including Bad Monkey, Slow Horses, Pachinko, Disclaimer, Shrinking and more. The streaming service recently announced shows like Deaf President Now! (documentary), The Gorge (horror thriller) and Lucky.

Apple is launching three new live global radio stations on Apple Music — Apple Música Uno, Apple Music Club and Apple Music Chill. Music listeners can listen to live-hosted radio for free, without a subscription, on Apple Music Radio.

Apple expects the December quarter’s (first-quarter fiscal 2025) revenues to grow low to mid-single digits on a year-over-year basis. For the Services segment, Apple expects a double-digit growth rate similar to fiscal 2024.

AAPL's Estimates Show Positive Trend

The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $124.1 billion, suggesting growth of 3.78% from the year-ago quarter’s reported figure.

The consensus mark for earnings has increased by couple of cents to $2.36 per share over the past 30 days, indicating 8.26% growth from the figure reported in the year-ago quarter.

Apple’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 5.05%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Apple Shares Overvalued

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

Apple is trading at a premium with a forward 12-month Price/Earnings (P/E) of 32.52X compared with the sector’s 27.27X and higher than the median of 29.16X, reflecting a stretched valuation.

Price/Earnings (F12M)

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

AAPL Trades Above 50-day & 200-day SMA

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Apple Shares: To Buy or Not to Buy

Apple’s AI push is attractive for growth-oriented investors. The Services business has emerged as AAPL’s new cash cow, with an expanding content portfolio for Apple TV+ and Apple Arcade.

However, we believe that Apple’s near-term growth prospects do not justify premium valuation. AAPL is facing challenges in China due to stiff competition. Muted iPhone sales is expected to hurt prospects.

Apple 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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