Should You Buy Apple Stock Before Tim Cook Reveals “Newest Family Member”?

Late last week, Apple (NASDAQ:AAPL) CEO Tim Cook teased the launch of a new product on Wednesday, Feb 19, 2025. The rumor mill speculates that Cook is referring to the iPhone SE 4 – the low-cost version of the company’s flagship mobile device.

Ahead of the product launch, Apple stock looks attractive but volatile – making it a tricky pick to buy at its current price of around $245. We believe there is minimal cause for concern with AAPL stock, which makes it attractive but highly sensitive to adverse events as its current valuation is very high.

Julian O’hayon (@anckor) on Unsplash

We arrive at our conclusion by comparing the current valuation of AAPL stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Apple along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below.

How does Apple’s valuation look vs. the S&P 500?

Going by what you pay per dollar of sales or profit, AAPL stock looks expensive compared to the broader market.

• Apple has a price-to-sales (P/S) ratio of 9.1 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 29.0 compared to 24.4 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 30.2 vs. the benchmark’s 24.4

How have Apple’s revenues grown over recent years?

Apple’s Revenues have grown marginally over recent years.

• Apple has seen its top line grow at an average rate of 2.3% over the last 3 years (vs. 9.8% for S&P 500)
• Its revenues have grown 2.0% from $383 Bil to $391 Bil in the last 12 months (vs. change of 5.6% for S&P 500)
• Also, its quarterly revenues grew 6.1% to $95 Bil in the most recent quarter from $89 Bil a year ago (vs. 7.2% change for S&P 500)

How profitable is Apple?

Apple’s profit margins are much higher than most companies in the Trefis coverage universe.

• Apple’s Operating Income over the last four quarters was $123 Bil, which represents a high Operating Margin of 31.5% (vs. 12.6% for S&P 500)
• Apple’s Operating Cash Flow (OCF) over this period was $118 Bil, pointing to a high OCF-to-Sales Ratio of 30.2% (vs. 14.4% for S&P 500)

Does Apple look financially stable?

Apple’s balance sheet looks very strong.

• Apple’s Debt figure stood at $107 Bil at the end of the most recent quarter, while its market capitalization is currently $3.7 Tril (as of 2/14/2025). This implies a very strong Debt-to-Equity Ratio of 3.0% (vs. 19.7% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $65 Bil of the $365 Bil in Total Assets for Apple.  This yields a strong Cash-to-Assets Ratio of 17.9% (vs. 14.1% for S&P 500)

How resilient is AAPL stock during a downturn?

AAPL stock has been more resilient than the benchmark S&P 500 index during the last 2 economic downturns. Worried about the impact of a market crash on AAPL stock? Our dashboard How Low Can Apple Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

COVID Recession (February to April 2020)

• AAPL stock fell 31.4% from a high of $79.40 on 12 February 2020 to $54.45 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Covid peak by 5 June 2020 – taking 74 days to recover while the S&P 500 took 148 days
• Since then, the stock has increased to a high of $258.74 on 26 December 2024 and currently trades at around $245

Great Recession (December 2007 to June 2009)

During the 2007-09 recession, AAPL stock fell from a peak value of $6.01 on 30 December 2007 to $2.35 on 20 January 2009 a decline of 60.9% (vs. a peak-to-trough decline of 56.8% for the S&P 500)

However, the stock fully recovered to its pre-recession peak by 9 November 2009 – taking 293 days to recoup its losses vs. the 1480 days taken by the S&P 500 to recover

Putting all the pieces together: What it means for AAPL stock

In summary, Apple’s performance across the parameters detailed above are as follows:

• Growth: Neutral
• Profitability: Very Strong
• Financial Stability: Extremely Strong
• Downturn Resilience: Very Strong
• Overall: Very Strong

Hence, despite its very high valuation, the stock appears attractive but volatile, which supports our conclusion that AAPL is a tricky stock to buy.

Not too happy about the volatile nature of AAPL stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.