Apple (AAPL -2.41%) is once again the most valuable company in the world.
The iPhone maker reclaimed that title earlier this year as enthusiasm for its artificial intelligence (AI) technology, Apple Intelligence, and the next round of iPhones, which will take advantage of the new AI technology, earned the stock another leg up.
Apple had earlier lagged behind its "Magnificent Seven" peers in the AI era, but the company has a hidden advantage over those companies with an installed base of more than 2 billion devices. In other words, Apple is in a better position to actually get people to use generative AI tools because the company creates so many of the devices that provide those tools to customers.
Apple is currently valued at a market cap of $3.5 trillion, and even though its business has seemed mature for a number of years, it keeps finding new ways to grow. Is it too late to buy Apple stock? Let's take a look at where it stands today.
Image source: Getty Images.
All about Apple Intelligence
The Apple Vision Pro spatial computing headset, launched earlier this year, seems to have flopped, but investor attention has quickly shifted to Apple's new breakthrough technology, Apple Intelligence.
Among Apple Intelligence's functions are image generation, custom Bitmojis and emojis, a writing assistant that can proofread and rewrite emails and other drafts, a tool that summarizes email and audio recordings and transcripts, and an improved version of the Siri voice assistant.
Apple hasn't released Apple Intelligence. It's scheduled to debut in beta in October, and seems likely to be Apple's biggest software update in its history.
Thus far, there's only anecdotal reporting on iPhone 16 sales, with mixed results. Apple won't provide numbers until the end of October, and even then, it won't be for a full quarter.
Apple isn't charging for Apple Intelligence. The company hopes instead that the new technology will drive sales of its devices, so demand for the iPhone 16 will be a key indicator of early interest in Apple Intelligence.
Additionally, Apple's services segment remains a promising engine of growth, though it's also facing an antitrust case from the Department of Justice, much like many of its big tech peers.
Is Apple a buy?
Investors have bid up Apple shares substantially this year, and it now trades at the highest price-to-earnings multiple it has in the last decade with the exception of a brief surge during the pandemic. You can see that in the chart below.
You'd expect a company with an expanding earnings multiple like Apple's to post accelerating growth, but Apple's revenue growth has been sluggish. Revenue rose 5% in the June-ended fiscal third quarter to $85.8 billion, a return to growth from a decline in the previous quarter. More impressive was earnings per share (EPS), which was up 11% as the company generated expanding margins thanks to growth in its services business, and it continues to benefit from share buybacks.
While Apple trades at a premium due in part to its competitive advantages and leadership position in consumer electronics, the stock still looks expensive for a company growing EPS by 11%.
Is it too late to buy Apple stock?
Given Apple's surge this year, its high valuation, and the uncertainty around Apple Intelligence, Apple stock could pull back if sales of the iPhone 16 don't exceed expectations.
While buying and holding Apple at any point in the past would have been a good decision, at the current price, investors shouldn't chase the stock. Waiting for a pullback looks like a more prudent move, at least until there's clear evidence that Apple Intelligence is moving the needle for the iPhone maker.
