Apple(US:AAPL) Zhi Tong Cai Jing·2025-12-31 09:08Core Viewpoint - Apple (AAPL.US) is one of the few large U.S. tech stocks underperforming in 2025, with an 8.5% increase lagging significantly behind the S&P 500 index. The company's lack of revenue growth, negative free cash flow, insufficient AI strategy, and perceived failures in recent product launches contribute to this underperformance [1][2]. Financial Performance - Apple has not achieved revenue growth, and its free cash flow has shown negative growth. The company reported a revenue of $416 billion, meaning a $1 billion product launch only represents a 0.2% growth, highlighting the challenges of scaling for such a large company [2][8]. - The stock is currently trading at a price-to-earnings (P/E) ratio of 36, which implies a yield of 2.77%, lower than the 10-year Treasury yield of 4.14%, indicating that without growth, the stock is overvalued [7][8]. Competitive Position - Apple maintains a strong competitive position due to its brand strength, integrated ecosystem, and loyal customer base. The brand is often ranked as the most valuable globally, allowing for significant pricing power [4]. - The integrated ecosystem of Apple products enhances user experience, making it a preferred choice for consumers seeking seamless functionality across devices [4]. - The loyal fan base contributes to brand strength and marketing advantages, as they actively promote Apple products through social media and reviews [4]. Investment Outlook - Despite being a great company, Apple is rated as "neutral" due to its growth challenges and high valuation multiples. The stock's P/E ratio of 36 and price-to-sales ratio of 9.8 indicate extreme premiums compared to sector medians [5][6]. - The company faces difficulties in finding new investment opportunities that can significantly alter its growth trajectory, as seen with the setbacks in projects like Apple Vision Pro and the Apple Car [2][9]. - Long-term revenue growth is conservatively estimated at 6.4%, which does not justify the current valuation, leading to the conclusion that the stock is overvalued at its current price [8][9].