Prediction: This Will Be Apple's Stock Price by the End of 2027
Key Points
Memory chip prices could sink Apple's profits or sales.
Apple is priced for perfection, which will be difficult to maintain.
Apple (NASDAQ: AAPL) has been a quiet outperformer this year. It has risen around 18% this year, while the S&P 500 (SNPINDEX: ^GSPC) is up around 13%. That's a solid outperformance, but what investors are focused on is what happens over the next year. Apple has some major headwinds popping up, and with new CEO John Ternus at the helm, he's going to be thrown into the deep end quickly.
I think this could be a problematic run for Apple, and if you own shares, now may be the time to exit.
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Apple is highly valued for its growth
If you compare Apple stock to its peers, it's clear that it has a much greater premium than any of them.
NVDA P/E Ratio (Forward) data by YCharts
Apple is in a league of its own and must maintain consistent execution if it hopes to stay on top. The problem is, a storm is coming.
During Tim Cook's last earnings call as CEO, he noted a particular problem that could cause issues: memory chip prices. AI firms have eaten up all available memory chip capacity, which is causing prices to skyrocket for these components. Apple isn't immune to these price increases, so it has two choices: First, it can eat the price increase, which cuts into profits. Second, it can raise prices on devices to compensate. The second option could push consumers who are already stretched to the brink, potentially leading them to delay an upgrade or switch to a different phone provider. Regardless, it isn't an easy situation for a new leader to find himself in, which is why Cook framed the event as a "100-year flood."
I think all of this could negatively affect Apple's stock and force the market to value Apple at a more reasonable level. With its big tech peers all growing faster, I think there's a tough case for Apple to maintain its premium valuation.
NVDA Revenue (Quarterly YOY Growth) data by YCharts
Should Apple fall to a big tech average valuation of 25 times forward earnings, combined with fiscal-year 2027's projections (Wall Street analysts estimate $9.57 in earnings per share next year), that would price the stock at about $240 per share. That's a long way down from today's $320 stock price, but I don't think it's out of the question.
The reality is that Apple is a very expensive stock with a valuation out of sync with other big tech peers despite a slower growth rate. Weakness in sales due to price hikes or shrinking margins could trigger a drop, making Apple a poor stock to own over the next year.
Keithen Drury has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.