After Earnings, Is Apple Stock a Buy, a Sell, or Fairly Valued?

Apple released its fiscal third-quarter earnings report on July 30. Here’s Morningstar’s take on Apple’s earnings and stock.

Key Morningstar Metrics for Apple

• Fair Value Estimate
  : USD 285.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Apple’s Fiscal Q3 Earnings

Apple’s June-quarter results were strong, highlighted by total revenue rising 16% year over year to USD 109.4 billion and 22% year-over-year growth in iPhone revenue. September guidance is weighed down by a combination of supply constraints, memory inflation, and foreign exchange headwinds.

Why it matters: The iPhone 17 continues to benefit from immense demand, as does the MacBook Neo. We expect supply constraints and memory inflation to weigh on results through 2027, but we expect Apple’s recent pricing increases to help mitigate the impact.

• We model a growth headwind of about 3% in the September quarter and fiscal 2027 from supply constraints, primarily due to tight global chip supply amid demand for artificial intelligence. Demand remains strong, and we still expect Apple to grow nicely despite these constraints.
• Adjusting for tariff refunds, product gross margin dipped 230 basis points sequentially in June due to memory inflation, and we expect another 250-basis-point dip in September. We expect pricing to limit the impact of memory beyond September, but still model a 200-basis-point headwind in 2027.

The bottom line: We trim our fair value estimate for wide-moat Apple to USD 285 from USD 290 to reflect short-term supply constraints and memory cost pressures.

• We still expect double-digit growth in 2027, led by pricing increases. June prices rose by 15% to 25%, and there may be another hike in the fall with new products. These help to partially offset memory inflation, while Apple shares some of the pain on gross margin.
• In 2028, we expect relief to both supply constraints and profitability via expanding supply, particularly for memory. Longer-term, we believe Apple’s price increases can benefit margins once memory prices come back to earth.
• We see Apple stock as slightly overvalued. There’s still some AI optimism priced in that we don’t think will translate to fundamental unit sales.

The following are excerpts from Morningstar’s company report on Apple.

Fair Value Estimate for Apple

Apple’s long-term fair value estimate of USD 285 per share implies a fiscal 2026 price/earnings multiple of 32 times, a fiscal 2026 enterprise value/revenue multiple of 8 times, and a fiscal 2026 free cash flow yield of 3%. We project 9% compound annual revenue growth for Apple through fiscal 2030. The iPhone will be the most significant contributor to revenue over our forecast, and we project 10% growth in iPhone revenue over the next five years, including superb growth above 20% in fiscal 2026. We forecast gross margins to rise past 50% in fiscal 2030, up from 47% in fiscal 2025.

We believe Apple can see margin expansion from a higher mix of higher-margin hardware, like iPhone Pro models, and services. In the short term, we see modest margin pressure from rising memory prices, but expect Apple to continue to navigate these well and maintain healthy margins. We observe robust R&D growth in fiscal 2026, which we think is ramping up Apple’s internal investments in AI and AI-centric devices for the future.

Read more about Apple’s fair value estimate.

Economic Moat Rating

We assign Apple a wide economic moat, stemming from customer switching costs, intangible assets, and a network effect. In our view, Apple’s iOS ecosystem extends far-reaching, sticky tendrils into customers’ wallets, entrenching customers with software capabilities and integration across disparate devices such as the iPhone, Mac, iPad, Apple Watch, and more. We also see immense design prowess at Apple, most impressively in the deep integration of hardware, software, and semiconductors to create best-in-breed products.

Finally, we see a virtuous cycle between Apple’s affluent customer base and vast ecosystem of developer partners. These moat sources elicit great profitability and returns on invested capital. In our view, Apple can leverage these moat sources into continued economic profits over the next 20 years, more likely than not.

Read more about Apple’s economic moat.

Financial Strength

We expect Apple to focus on using its immense cash flow to return capital to shareholders while increasing its net leverage over the medium term. Apple has a terrific balance sheet, with a net cash position of USD 34 billion as of September 2025. Management has set a goal to become cash-neutral eventually, with no set timetable. We model it to hit this target near the end of the decade.

Apple supplements its strong balance sheet with impressive cash flow. Over the past five years, the firm has averaged more than USD 100 billion in free cash flow generation annually, and we forecast significant free cash flow growth over the forecast period. Since 2020, this cash flow has generated an average free cash flow margin of more than 25%, and Apple has converted more than 100% of its net income into free cash flow. We anticipate the firm to hit these figures over our five-year forecast, as well.

Read more about Apple’s financial strength.

Risk and Uncertainty

We assign Apple a Medium Uncertainty Rating. We see the firm’s greatest risk as its reliance on consumer spending, for which there is great competition and cyclicality. The iPhone could be unseated by a new device or “superapp.” We view the firm defending against this risk, however, by introducing new form factors (like a watch and an augmented reality headset) and selling an ecosystem of software and services on top of hardware. We also see geopolitical risk arising from Apple’s supply chain. It is heavily dependent on Foxconn for assembly and Taiwan Semiconductor for chip production. If relations between the United States and China sour, or if China threatened Taiwan, Apple could see a severe hit to its supply.

Apple also faces regulatory scrutiny. The European Union has enacted regulations requiring Apple to offer third-party app stores, adopt open messaging standards, and prevent it from gatekeeping its repair materials from third parties. Similarly, there are ongoing antitrust cases in the US that could affect Apple’s walled garden ecosystem. All of these help chip away at the firm’s differentiation, but we believe the firm is offsetting them by adding new stick points with customers, such as new services and devices. Finally, we see low environmental, social, and governance risk for Apple. The firm has committed to full carbon neutrality by 2030, and we believe it will achieve its goal. The potential future loss of talented human capital could be another risk on this front.

Read more about Apple’s risk and uncertainty.

AAPL Bulls Say

• Apple offers an expansive ecosystem of tightly integrated hardware, software, and services that locks in customers and drives strong profitability.
• We like Apple’s move to in-house chip development, which we think has accelerated its product development and increased its differentiation.
• Apple has a stellar balance sheet and returns substantial cash flow to shareholders.

AAPL Bears Say

• Apple is prone to consumer spending and preferences, which creates cyclicality and opens the firm to disruption.
• Apple’s supply chain is highly concentrated in China and Taiwan, which opens up the firm to geopolitical risk. Attempts to diversify into other regions may pressure profitability or efficiency.
• Regulators have a keen eye on Apple, and recent regulations have chipped away at parts of Apple’s sticky ecosystem.

This article was compiled by Irza Waraich.