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As we begin the holiday quarter, Apple (NASDAQ: AAPL) is in a time of transition. John Ternus took over as CEO from Tim Cook on Sept. 1, and he takes the helm at a time when the company benefits from an upgrade cycle but has not made the strides in artificial intelligence (AI) that many of its competitors have.
Given these struggles, should investors buy Apple as it benefits from holiday-related sales, or stand pat for now?
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Indeed, buying now means investors are taking a chance on the company just a few weeks into a new CEO's tenure. Although leadership runs such as Satya Nadella at Microsoft or Lip-Bu Tan at Intel have proven profitable for investors, CEO tenures often result in investor losses.
It is too early to tell how Ternus will do in the job. What we know is that he has taken a more hands-on role with Apple design. To make time for that involvement, he has delegated financial and supply chain responsibilities to other executives.
Considering Ternus's hardware engineering background, this move may make sense. While Cook was still CEO, Apple's AI is such that it chose Alphabet's Google Gemini to become the core of Apple's next-generation Foundation model and enlisted it in helping to improve Siri.
Improved AI, no matter where it is from, and a recent upgrade cycle may be causes for optimism. After multiple quarters of sluggish growth, the $364 billion in net sales for the first three quarters of fiscal 2026 (ended June 27) increased by 16% compared to the same period in fiscal 2025.
Looking ahead, analysts believe Apple will finish the current fiscal year with 15% annual net sales growth, then slow to 11% in fiscal 2027. That includes an 8% growth forecast for the upcoming holiday quarter. That is still well above the 6% net sales increase in fiscal 2025, but the slowdown could be evidence that the upgrade cycle is starting to run its course.
Instead, the problem may come from valuation. As growth slows, Apple still has to contend with a 39 P/E ratio, and to some analysts, this is a red flag Apple investors can't afford to ignore. It also makes it difficult to choose Apple when its AI provider, Alphabet, trades at a forward P/E ratio of 29, a factor that, by itself, could make investors rethink positions in Apple stock.
Given Apple's current state and stock price, investors should probably not add shares at this time.
Indeed, this is not a call for Apple's longtime investors to sell. Even if growth slows, it is unlikely to stop. It is also quite possible that Apple's products will improve as its new CEO becomes directly involved in the design process.
Nonetheless, net sales growth is on track to slow during the holiday season. This bodes poorly for the company when it trades at a relatively high P/E ratio.
Hence, without a substantial discount in the stock or meaningful signs of technical improvement, investors should probably not buy Apple at these levels.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Intel, and Microsoft. The Motley Fool has a disclosure policy.
Is Apple Stock a Buy During the Holiday Quarter? was originally published by The Motley Fool
