Is Apple Stock a Buy During the Holiday Quarter?

At the start of the holiday quarter, Apple (AAPL) finds itself in a period of change. John Ternus assumed the role of CEO from Tim Cook on September 1st. While the company is set to benefit from an upgrade cycle, it has yet to make significant advancements in artificial intelligence (AI) compared to many of its competitors. Therefore, investors must decide whether to purchase Apple during this holiday period or hold off for now.

Joining the company at this stage means taking a risk, given that Ternus is just weeks into his tenure as CEO. Although leaders like Satya Nadella at Microsoft and Lip-Bu Tan at Intel have proven to be profitable for investors, CEO tenures can often lead to investor losses. The extent of Ternus's effectiveness remains to be seen.

However, it is evident that he has taken a more active role in Apple's design process, delegating financial and supply chain responsibilities to other executives. Ternus's background in hardware engineering may prove beneficial for the company. Despite Tim Cook's leadership, Apple's AI development has progressed to the point where Alphabet's Google Gemini has become the foundation model for Apple's next-generation AI and is aiding in improving Siri.

This improvement, regardless of the source, and Apple's upgrade cycle may provide grounds for optimism. The first three quarters of fiscal 2026 (ending June 27) saw net sales of $364 billion, a 16% increase from the same period in fiscal 2025. Analysts predict that Apple will conclude the current fiscal year with a 15% annual net sales growth, with a slowdown to 11% in fiscal 2027.

This growth forecast includes an 8% increase in the upcoming holiday quarter. While this growth still surpasses the 6% increase seen in fiscal 2025, it could indicate that the upgrade cycle is starting to wane. The issue could stem from Apple's valuation, which remains at a 39 P/E ratio. This metric raises concerns for many analysts.

Additionally, Apple's AI provider, Alphabet, trades at a forward P/E ratio of 29, which could further dissuade investors from positioning themselves in Apple's stock. Considering Apple's current situation and stock price, it may be prudent for investors to refrain from adding shares at this time. This is not a recommendation for Apple's existing investors to sell their shares.

Even if growth slows, it is improbable that it will cease entirely. Moreover, it is entirely possible that Apple's products will improve as Ternus becomes directly involved in the design process. Nevertheless, net sales growth is expected to decelerate during the holiday season. This trend raises concerns for the company when it trades at a relatively high P/E ratio.

Therefore, absent a significant markdown in the stock price or concrete indications of technical improvement, investors should likely avoid buying Apple at its current valuation.