Apple AAPL shares have dropped 4.2% year to date (YTD), outperforming close peers such as HP HPQ and Microsoft MSFT but lagging Amazon AMZN. Shares of Amazon have returned 3.3% while Microsoft and HP shares have dropped 23.3% and 18%, respectively. Apple shares also lagged the broader Zacks Computer and Technology sector, which dropped 1.3% YTD. Apart from stiff competition in the smartphone and personal computer (PC) domains, AAPL shares have suffered from issues with its AI initiatives, with the postponement of several features, which has been a concern for investors. So, what should investors do with the AAPL stock? Let’s dig deep to find out.
Apple Stock’s Price Performance
Image Source: Zacks Investment Research
Apple Suffers From Stiff Competition
AAPL is facing stiff competition from the likes of Lenovo, Dell Technologies and HP in the PC domain. Per Gartner, worldwide PC shipments totaled 62.8 million units in the first quarter of 2026, up 4% year over year. Lenovo led with 26.5% market share, trailed by HP and Dell Technologies with 19.3% and 16.5%, respectively. Apple had a 10.6% market share.
The smartphone segment is chock-a-block with competition from Chinese vendors, as well as Samsung and Google Pixel. Per Counterpoint’s latest data, global smartphone shipments declined 6% year over year in the first quarter of 2026, with Apple leading with 21% market share and shipments growing 5% year over year, driven by strong iPhone 17 demand and improved performance in China. Samsung’s shipments declined 6% year over year with 20% market share.
AAPL’s FY26 Earnings Estimate Revision Shows Declining Trend
The Zacks Consensus Estimate for Apple’s fiscal 2026 earnings has declined 4 cents to $8.40 per share over the past 30 days, indicating 12.6% growth from the figure reported in fiscal 2025.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
The Zacks Consensus Estimate for Apple’s fiscal 2026 revenues is pegged at $461.68 billion, indicating 10.94% growth over the figure reported in fiscal 2025.
Apple Shares are Overvalued
Apple shares are overvalued, as suggested by a Value Score of F. The AAPL stock is trading at a forward 12-month price/earnings (P/E) of 29.32X compared with the broader Zacks Computer & Technology sector’s 23.46X.
Apple shares are trading at a premium compared with peers, including HP, Microsoft and Amazon. Shares of HP, Microsoft and Amazon are trading at a P/E multiple of 6.37, 20.17 and 29.03, respectively.
Apple Stock’s Valuation
Image Source: Zacks Investment Research
Can Strong iPhone Sales, New Macs & Services Aid Apple Stock?
Strong iPhone 17 sales are expected to help Apple’s top-line grow in fiscal 2026. The company has been adding features to the iPhone line-up, including Apple Intelligence tools as well as Apple Creator Studio, which is driving iPhone sales. The company has introduced dozens of features, including writing tools and cleanup and made it available in 15 languages. Visual intelligence is helping users learn and do more with their content on iPhone. It is helping users search faster, take action and answer questions across their apps.
Apple’s multi-year collaboration deal with Google is now expected to be a key catalyst in boosting Apple Intelligence features. Under the agreement, the next generation of Apple’s foundation models will be based on Google’s Gemini models and cloud technology. Apple Intelligence features, including a more personalized Siri, will now be powered by Google models. However, Apple Intelligence will continue to run on Apple devices and Private Cloud Compute.
Apple is expanding its MacBook portfolio with the launch of MacBook Air and MacBook Pro. The devices come at an opportune time as the iPhone maker faces stiff competition from the likes of Lenovo, HP and Dell Technologies. The introduction of M5 Pro and M5 Max chips, built using a new Apple-designed Fusion Architecture, which connects two dies into a single SoC, boosts performance. The new MacBook Air is powered by the latest M5, which features a faster CPU and next-generation GPU with a Neural Accelerator in each core. The 14-inch and 16-inch MacBook Pro, powered by M5 Pro and M5 Max, adds superior performance and AI capabilities.
Apple’s Services segment benefits from an expanding games portfolio and the growing popularity of Apple TV+. Apple’s strategy of adding new games on a continuous basis is driving its user base. The Services have been benefiting from frequent updates, thereby driving the user base. New features helped Apple Pay make a significant impact by eliminating well over $1 billion in fraud, while generating more than $100 billion in incremental merchant sales globally. Apple Pay is now available in 89 markets, while Apple Fitness+ has expanded to 28 additional countries and regions. Apple Arcade expanded its catalog of highly rated games with more than 50 new titles.
Conclusion
Apple’s prospects are expected to benefit from its strong iPhone and Services business. Apple’s expanding AI footprint, thanks to the GOOGL collaboration, bodes well for long-term prospects. However, stiff competition in the smartphone, PC and AI domains, along with a stretched valuation, is expected to remain an overhang on the stock.
AAPL currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable point to enter the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).