Could Apple Stock Really Fall 40% in 2026? Valuation Risks Are Rising

Apple’s stock certainly has been a thrilling ride. Since the close of 2022, Apple’s stock has seen a rise from around $130 to almost $275, which resulted in the company getting so close to all-time high prices. It seems like just another achievement of Apple’s long story of giving back to the investors.

However, the fundamentals tell us a much less glamorous story behind that rally, and the analysts who warn about an upcoming sharp reset, have based their predictions on this disconnection.

Rally Built on Valuation and Not Growth

Over the past three years, Apple’s revenues remained almost the same, with an annual growth rate of only 2.4%. This means that operating margins have only slightly increased, going from about 30.3% in 2022 to approximately 31.9% today.

The increase has been mainly due to product mix and services pricing, instead of a big demand surge. To put it another way, Apple has not extended its market share, yet its stock price has doubled. The reason behind it is that Apple’s valuation multiple increased enormously.

The stock was rerated at a premium, while revenue growth remained low, which means that investors are paying much more for each dollar of sales and earnings now compared to a few years ago. This scenario poses a risk if any acceptable growth doesn’t occur.

Falling Behind in the AI Race

One of the main worries that came along is Apple’s position in artificial intelligence. The AI hype has become the biggest thing in technology, and Apple has been moving really slow and irregularly in this area.

Long-awaited enhancements to Siri have been delayed time and again, and Apple’s AI is generally considered to be way behind not only Google and Microsoft, but also other tech companies who are adopting AI, such as Amazon.

The Vision Pro, which is being seen as one of the company’s most daring product moves in years, has not managed to get the adoption either. The expected first-year sales of only 400,000 to 500,000 units are a long way from what would be needed for justifiable long-term growth.

Apple, the company that holds a place among the growth leaders, has not so much to offer in the way of innovation pipeline as it might have been expected by the market.

Financial Engineering

Instead of taking risks and investing heavily in new growth engines, Apple has made financial engineering its main strategy. Over the last three years, the company has spent about $280 billion on buybacks, which not only reduced its share count but also increased its earnings per share. Just in the last fiscal year, approximately $91 billion were spent on buybacks. 

In contrast, R&D received about $34 billion from Apple, while capital expenditures were only $13 billion. Such disparity is very important, as the companies enjoying premium valuations are usually the ones that keep on massively reinvesting to secure their future growth.

Apple, instead, seems to be concentrating on capital returns, while encouraging underinvestment in areas that might influence its next decade.

A Valuation With Little Margin for Error

Currently Apple trades nearly 10 times, which is close to its highest levels ever and also much above its historic averages, even more than during the time of Steve Jobs. The present valuation suggests that a huge new growth phase is on the way.

However, the revenue is stagnant, the AI implementation is behind schedule, and new product areas have not met expectations. The disparity between the two is what poses the real threat. If the mood of the investor changes and Apple is again considered as a mature consumer tech company, instead of a growth giant, then a significant drop of 40% is no more unimaginable. 

Apple is indeed a world-class company with an unparalleled ecosystem, but quality does not always mean that it will be priced accordingly. For investors, this could be a period not to chase Apple’s rally and rather to take a break, reevaluate the expectations, and think about how much risk they are ready to bear.