Apple Inc. (NASDAQ: AAPL) ended 2024 near record highs, with its stock closing at $260 and the company’s market cap approaching an unprecedented $4 trillion. Yet, this valuation surge comes amid growing concerns about Apple’s ability to deliver meaningful growth through new products like Apple Intelligence and the Vision Pro.
Apple Intelligence: A Missed Opportunity
Apple Intelligence, the company’s foray into artificial intelligence (AI), has failed to generate the excitement or utility needed to justify its hype. A recent SellCell survey revealed that while 47.6% of iPhone users want AI features, 73% are dissatisfied with Apple’s current AI offerings.
The AI features introduced in iOS 18.2, such as Genmoji and ChatGPT integration, have not impressed users. Notably, Apple’s implementation of ChatGPT simply redirects Siri queries to OpenAI’s platform, offering little in terms of seamless integration or unique functionality.
“Apple demoed its ChatGPT integration as something secondary to Siri’s knowledge … users are already accustomed to going directly to ChatGPT or Google for AI features.”
Apple’s AI efforts appear underwhelming compared to competitors like OpenAI, which generates over $300 million in monthly revenue from high-performance users. The lack of innovation raises doubts about Apple’s ability to leverage AI as a growth driver.
Stagnant Revenue and Growth
Apple’s stock rally has not been supported by significant revenue growth. Over the past two years, Apple has reported five quarters of year-over-year revenue declines out of the last eight.
- iPhone Revenue: Peaked at $205 billion in FY22 but has since stagnated.
- Services Growth: Increased by $11 billion to reach $96 billion in FY24, growing at 13%. However, this pace is insufficient to drive the overall growth analysts predict.
For FY25, Apple is forecasted to generate $414 billion in revenue, up $23 billion year-over-year. Half of this growth is expected from Services, with the rest attributed to iPhone sales and Apple Intelligence—both of which face significant headwinds.
Product Challenges: Vision Pro and Beyond
The Vision Pro, Apple’s mixed-reality (MR) device, has also failed to deliver. Despite initial fanfare, the device has captured only 5% market share in the VR/MR market, which is projected to sell nearly 10 million units in 2025.
Meanwhile, analysts remain bullish, with some projecting a $325 price target for Apple, which would imply a $5 trillion market cap. This optimism seems disconnected from Apple’s current growth trajectory.
Competitive Pressure and Valuation Concerns
At 34x FY25 EPS estimates, Apple is significantly more expensive than peers like Microsoft (MSFT), Google (GOOGL), and Meta Platforms (META), all of which boast higher growth rates and better AI integration.
Apple’s reliance on $20 billion in annual fees from Google for Safari’s default search setting is also under scrutiny, as the arrangement faces potential disruption from the Department of Justice’s antitrust case.
Takeaway: An Overvalued Stock
Apple’s meteoric rise in valuation appears driven by hype around products like Vision Pro and AI, neither of which has delivered meaningful growth. With stagnant revenue and limited innovation, Apple’s projected growth rates seem overly optimistic.
Investors should approach Apple’s stock with caution. A more realistic valuation, based on FY25 EPS targets and a reasonable 15x P/E multiple, would place the stock at approximately $110—far below its current price.
