Apple AAPL shares had a terrific trailing 12 months, driven by its improving prospects, courtesy of the launch of Apple Intelligence. Since Jun. 10, 2024, when the iPhone maker announced Apple Intelligence in its annual developers’ event named the Worldwide Developers Conference, its shares have jumped 29.6%.

However, Apple lost some momentum in early 2025 due to growing woes in China, with the iPhone losing market share to China-based competitors like Xiaomi and Vivo, per the latest data from Counterpoint Research, as cited by Bloomberg. 

Globally, Apple’s 2024 iPhone shipment declined 2% from that reported in 2023 and trailed Samsung, which saw shipment growth of 1%. Xiaomi gained the most, with its 2024 shipments jumping 12% from 2023. Overall, global smartphone sales grew 4% year over year in 2024.

Stiff competition from the likes of Huawei and Xiaomi in China compelled Apple to offer rare discounts for its latest iPhone model between Jan. 4 and Jan. 7. However, the lack of Apple Intelligence in Mainland China is expected to hurt despite the discounts on high-end iPhones.

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AAPL’s Services business is expected to drive top-line growth. 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 the growing user base of Apple Pay, has helped drive subscriber growth.

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 U.A.E., Chile, Japan, Canada, Italy and Germany. Apple Pay is now available in countries like Egypt and Uruguay. The expanding content portfolio of Apple TV+ is noteworthy. 

The addition of Apple Intelligence is expected to boost user engagement, as it 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.

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

The Zacks Consensus Estimate for Apple’s second-quarter fiscal 2025 revenues is pegged at $95.96 billion, suggesting growth of 5.74% from the year-ago quarter’s reported figure.

The consensus mark for earnings has been unchanged at $1.68 per share over the past 30 days, indicating 9.8% growth from the figure reported in the year-ago quarter.

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

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

 

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

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

Apple is trading at a premium with a forward 12-month P/E of 30.76X compared with the sector’s 26.62X and higher than the median of 29.64X, reflecting a stretched valuation.

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AAPL shares are now trading below the 50-day moving average, indicating a bearish trend.

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Apple’s AI push with Apple Intelligence is noteworthy. However, it is still playing catch up with the likes of Microsoft MSFT, Alphabet GOOGL and Amazon AMZN.

Although the Services business has emerged as AAPL’s new cash cow, with an expanding content portfolio for Apple TV+ and Apple Arcade, we believe that the delay in Apple Intelligence’s launch in countries like China and India will hurt shares.

Hence, we believe that Apple’s near-term growth prospects do not justify a premium valuation.

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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