The Zacks Analyst Blog Apple, Alphabet, Amazon and Microsoft

Core Viewpoint - Apple has experienced a significant stock rally of 41.5% over the past six months, outperforming the Zacks Computer and Technology sector, which returned 28.4%. This growth is attributed to strong performance in its Services segment, robust iPhone sales, and a refreshed Mac portfolio, despite facing challenges from competition and market uncertainties [2][4][11]. Group 1: Stock Performance and Market Position - Apple shares are currently trading above both the 50-day and 200-day moving averages, indicating a bullish trend [3] - The Zacks Consensus Estimate for Apple's first-quarter fiscal 2026 earnings has increased to $2.65 per share, reflecting a 10.42% growth year-over-year [9] - The revenue estimate for the same quarter is projected at $137.46 billion, indicating a 10.59% increase compared to the previous year [10] Group 2: Product Performance and Prospects - Continued sales from the iPhone 16 series and strong adoption of the iPhone 17 series are expected to drive Apple's prospects in 2026, with the iPhone 16 being the best-selling smartphone globally in Q3 2025 [4] - The Services segment, which includes various digital offerings, is benefiting from an expanding user base and a growing portfolio of games and content [5] - The launch of the M5 chip-powered 14-inch MacBook Pro is expected to enhance Apple's market share due to its superior performance compared to previous models [6] Group 3: Financial Health and Shareholder Returns - As of September 27, 2025, Apple reported cash and marketable securities of $132.42 billion against term debt of $90.68 billion, indicating strong liquidity [7] - Apple returned nearly $24 billion to shareholders in the reported quarter through dividends and share repurchases, enhancing its attractiveness to investors [8] Group 4: Competitive Landscape - Apple faces stiff competition in the AI space from companies like Alphabet, Amazon, and Microsoft, which have made significant advancements in AI technologies [11][12] - In the smartphone market, Apple competes with Chinese manufacturers, Samsung, and Alphabet's Pixel devices, while in the PC market, it faces challenges from HP, Dell, and Lenovo [13] Group 5: Valuation Concerns - Apple's stock is considered overvalued, with a forward price/sales ratio of 8.97X compared to the sector's 6.82X and Amazon's 3.12X, indicating potential concerns for investors [14] - The current Zacks Rank for Apple is 3 (Hold), suggesting that investors may want to wait for a more favorable entry point [15]