Apple's Valuation Compressed as Services Growth Decelerates
The bear case for Apple is no longer hypothetical but rather priced in slowly as its stock trades at a premium valuation. According to InvestingPro's fair value model, the stock is overvalued by approximately $29 per share, and analysts are revising their price targets downward. The latest Services growth decelerated below 10% YoY for the first time since June 2023.
KeyBanc's thesis holds water as services growth commands a lower multiple than volume-led growth. Barclays maintains an Underweight rating with a $230 target, while Morgan Stanley cut its price target to $360 citing Services deceleration and margin compression. The data shows that Services revenue of $30.74B in the most recent quarter missed Barclays' estimate of $31.18B.
Valuation compression is already happening as Apple's P/E ratio has expanded above the three-year average. Analyst consensus targets imply only 9.7% upside, a thin margin of safety for a stock that returned 31.6% over the past year. The market asks what justifies a 34x earnings multiple on a business where the high-margin Services engine is losing momentum.