Apple’s (AAPL) stock performance this year has been nothing short of disappointing. Although it has rallied more than 35% since bottoming out in April during the tariff debacle, its share price still implies a 5.3% decline year-to-date at the time of writing, making the Cupertino company the worst performer among the Magnificent 7 peers.
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This underperformance is closely tied to Apple’s struggle to capture the artificial intelligence (AI) opportunity in the same way its main peers have. The company has paid a high price for being the Big Tech firm most obsessed with capital returns while investing the least in innovation—arguably poor timing as the tech space increasingly revolves around AI. As a result, Apple’s projections for organic top- and bottom-line growth are the lowest in its peer group.
That said, Apple remains Apple. Financially, it continues to impress with a triple-A balance sheet and a return on invested capital that is unmatched in terms of relevance and consistency—qualities that are undeniably commendable. Yet in a market increasingly focused on AI-driven growth, even companies with a track record of consistent performance face scrutiny over their future prospects.
It is precisely this balance between quality and growth that makes Apple’s current multiple feel potentially stretched. I believe a more moderate multiple would be justified given its uncomfortable position in the AI race, but I also don’t think the stock warrants a steep discount relative to its peers. With a lack of near-term catalysts supporting Apple’s growth thesis, the short- to medium-term trend appears tilted toward underperformance, making a Hold stance the more prudent approach.
A Decade Ahead, Now a Step Behind
Since the dawn of the AI revolution, Apple has found itself in a position it rarely occupies in the tech world: that of the underdog.
Apple’s main moat is its control over an ecosystem with an incredibly powerful installed base, which, in theory, should make monetizing AI a straightforward path. Yet, the company has still not found a straightforward way to capitalize on this advantage and, even worse, has frequently relied on outsourcing intelligence rather than developing it in-house.
Its long-anticipated Apple Intelligence has yet to prove its capabilities. Take Siri, for example—a product launched a decade before ChatGPT that remains stagnant and unreliable today, forcing Apple to integrate ChatGPT into iOS just to stay relevant.
All of this ties back to Apple’s capital allocation priorities. While peers like Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), and Meta (META) invest between $30 billion and $50 billion annually into AI infrastructure, Apple’s projected CapEx for this year is just $13 billion to $14 billion, based on quarterly figures, with no specific data on exclusive AI spending.
The company’s preference for allocating far more capital to share repurchases than to innovation—effectively inflating EPS in a non-organic way—runs counter to the very essence of the tech sector, which thrives on disruption.
Apple’s Efficiency Premium and the Limits of Its Multiple
Although Apple may be disappointing in its approach to AI, that doesn’t mean the company is fundamentally struggling. Quite the opposite. When we compare Apple to its main Magnificent 7 peers, only Nvidia (NVDA) currently manages to deliver returns above its cost of capital to shareholders.
Apple has a return on invested capital (ROIC)—calculated using the traditional method—of a staggering 59% over the past twelve months, against an average WACC of roughly 9%. That creates a massive spread of about 50 percentage points between what Apple generates on its capital and its opportunity cost. Even more impressive, this ROIC is quite consistent with the five-year average of 51%.
For context, apart from Nvidia’s 98% ROIC over the past year (though consistency remains unproven), Alphabet and Microsoft generated 32% and 24%, respectively. This demonstrates that, despite all the AI hype, Apple remains one of the most efficient companies on the planet at converting capital into tangible economic value. Naturally, this deserves a premium multiple—but the real question is how far that multiple can stretch.
The Price of Consistency in an AI-Obsessed Market
The paradox lies in determining how much of Apple’s higher multiple is due to the quality of its business and how much is attributed to its growth potential. Today, Apple trades at a forward P/E of 31.1x, slightly above its five-year average of 28.5x, but still only higher than the multiples of Alphabet and Meta, which trade at forward P/Es of 24x and 26x, respectively.
To a certain extent, I believe Apple deserves a premium multiple compared to its Big Tech peers, precisely because of its historical ability to generate extraordinary —and most importantly —consistent returns for shareholders—a track record that also translates into a very low risk of underperformance.
Meanwhile, the pace of AI growth from competitors puts Apple’s slower growth in sharper contrast. For example, Apple’s latest product events were more incremental than transformational. While no major iPhone upgrade cycle may be expected in the near term, consensus points to long-term EPS growth (three to five years) of 10.3%.
It’s worth noting that part of this growth isn’t entirely organic, given aggressive buyback initiatives averaging 3.2% of shares canceled per year since 2020. This puts Apple at a PEG ratio of 3, compared to Microsoft’s 2.7 and Amazon’s 2, though still higher than Alphabet’s 1.6, Meta’s 1.5, or Nvidia’s 1.1. I don’t think paying a multiple aligned with Apple’s historical average is unreasonable, but arguably Apple deserves a more mild multiple given its “underdog” position in AI.
Even without near-term AI catalysts, the consensus annual EPS for Fiscal 2025 of $7.38—implying 9.4% year-over-year growth—multiplied by the historical P/E of 28.5x, points to a market cap of roughly $3.12 trillion, which I believe more realistically reflects Apple’s fair price today.
What Will Apple Stock Be Worth in 2025?
Wall Street sentiment on Apple leans bullish, though caution outweighs outright conviction. Among 31 analysts, 14 are bullish, 15 are neutral, and two are bearish. AAPL’s average price target of $240.63 points to only a modest 2.8% upside from current levels.
Apple’s Premium on Pause Amid AI Underdog Reality
Apple’s uncomfortable underdog position in the current AI tech space has sharpened the debate between quality versus growth in its investment thesis. On the one hand, the company remains a capital-return machine with an almost flawless track record of execution—and that alone justifies paying a premium relative to many of its peers.
On the other hand, mid-to-high single-digit growth rates at the top and bottom lines, limited investment in innovation compared to AI front-runners, and a shareholder-obsessed strategy at the expense of innovation put an asterisk on the viability of a premium multiple—at least compared to the company’s own history.
Therefore, given its more restrained growth profile relative to peers, I believe Apple’s current multiple should be more conservative, with its latest five-year average serving as a reasonable benchmark. That said, I would not touch AAPL below the $210 level, which is why I maintain a Hold rating on the stock.