January 30 will be a massive day for Apple (AAPL 0.75%) stock, as that's when it reports Q1 FY 2025 (ending around December 31) results. This is a huge deal, as it includes the all-important holiday quarter, which could make or break Apple's stock.
Apple needs to change the narrative around its stock, as it has delivered fairly stagnant growth over the past few years. This report could mark a huge shift in sentiment for Apple stock, and it needs a strong report to maintain the status quo.
Apple needs to kickstart its revenue growth this year
Apple is likely the most recognizable consumer electronic brand around the globe. They have built a powerhouse on an ecosystem that connects flawlessly with each other and successfully captured the most important audience for any company: Young consumers.
This drove significant growth for many years, but since 2022, its revenue hasn't really grown.
AAPL Revenue (TTM) data by YCharts
That's years of stagnant revenue, which isn't a great sign for a business. However, Apple is one of the best companies in the world, so that hasn't stopped it from growing its earnings through a combination of share buybacks and improving profitability. Still, there is only so much juice to squeeze when making a company more efficient, and Apple may be nearing its limit.
AAPL Operating Margin (Quarterly) data by YCharts
This leaves share buybacks as the primary way to grow earnings, but the effect of these repurchases may start to diminish. In Q4 FY 2024 (ending September 28), Apple spent $25 billion on buybacks. But that occurred during a time when Apple was valued at near its highest point in five years.
AAPL PE Ratio data by YCharts
This makes the share repurchases less effective because the company has to pay a higher price to repurchase its own stock. This reduces the program's effect on earnings per share (EPS) growth.
So, with two of Apple's primary ways to grow earnings potentially running out of steam, the conversation circles back to revenue growth, which Apple has struggled with over the past few years.
Expectations for Q1 aren't high
Q1 FY 2025 encompasses the holiday quarter, and it will be a key moment for Apple to see if its iPhones and Apple Intelligence made a difference for consumers. Apple is seeing rising competition from Android phone makers, and this may weigh in on Apple's results.
Wall Street analysts aren't expecting a lot from Apple in Q1, as they project 3.9% sales growth and 7.8% EPS growth. That is pretty poor performance from any company, and investors may be highly critical of Apple even if they post results that everyone expects.
So, should investors buy Apple stock before January 30? I'd say no.
There isn't much optimism about Apple's business right now, and even if it reports a blowout quarter, the expectations are so high that Apple's stock likely won't budge. It trades for 32 times forward earnings right now, which is normally a level reserved for a company growing earnings and revenue at least in the mid-teens range.
Apple isn't anywhere close to that, so there's a lot of risk and not a ton of reward left in the stock. There are many cheaper alternatives with better growth than Apple, and investors should invest their money in those before buying Apple shares.
