Apple (AAPL) rose about 0.75% on a day when the NASDAQ and S&P 500 fell. The stock is up roughly 15% this year.
The bull and bear frame
Evercore ISI stays bullish on AAPL with an outperform rating and a $365 price target, set in a note from last week. The firm points to pent-up iPhone demand, the iPhone 18 cycle, and Apple's expected move into foldable phones. The longer-term driver is AI: Evercore argues the iPhone could become a "consumer AI toll booth," where Apple Intelligence and a stronger Siri push upgrades and open new revenue.
Against that, Counterpoint Research expects Apple's smartphone shipments to drop about 2% this year as the global handset market slows.
The valuation problem
At earnings Apple (AAPL) carried a price-to-earnings ratio (PE) above 40. It sits closer to 35 now, five to six points lower. The open question is whether that is cheap enough, or whether it needs to fall back toward its lower historical PE. The same pattern showed up in Walmart (WMT): companies that reached very high valuations have come down.
The setup carries real risk. Tim Cook is leaving, and new CEO John Ternus faces a big test in the iPhone 18 launch and how he runs Apple from here. Guidance into the fiscal fourth quarter showed some deceleration, which pushed the stock down. People are excited about the iPhone 18 without a clear reason - there is no sign of dramatic changes, yet a lot of faith is riding on it. One point in Apple's favor: it dodged the heavy AI capital spending (capex) that other firms are taking on, and wherever AI shows up, it will likely run on an Apple phone. Even so, valuation was always the sticking point, and it may still be.
Pricing pressure and the foldable
iPhone revenue grew 22% last quarter, a new record, driven by a strong iPhone 17 cycle. New phones arrive in September. Apple has already warned and raised prices on other products because of memory chip shortages and higher component costs. It will have to raise prices on the new phones too. A $100 increase hits consumer demand; $150 to $200 on the high-end models hits it harder. That makes the coming comparisons hard to match.
Services revenue grew 12%, nothing unusual but still growing. Apple's installed base tops 2.5 billion iPhones and other products, which supports the "gatekeeper for AI" idea - collecting value through partnerships without spending the capex.
Much of the excitement may be about the foldable phone due this fall, the "ultra" version. Apple will not run large production on it because it lacks the capacity, and the price is unknown.
Example trades
Both trades use the September 18th monthly options, about 25 days out (three and a half weeks). The expected move over that period is plus or minus $17.
Bullish - unbalanced (broken wing) call butterfly. Buy the 312 call, sell two 330 calls, and buy one 335 call. This is a long $17.5 call vertical against a short $5 call vertical. It went in near $5.50 and trades closer to $5.10 now, because the stock moved slightly away from 312. Risk is defined and equals the debit paid, about $5 and change ($500 to $550). Break even is around $318, only about 2% above the current price. The target is the 330 strike, the point of maximum profit - not the all-time high, which reached the 330 to 344 area. If the stock gets to 330, the trade has a chance to triple; even above 335 it still more than doubles. The broken wing structure lowers the cost versus a plain call vertical, giving up some upside profit in exchange.
Bearish - put vertical. Same September series. Buy the 315 put, which is in the money by about $3.50 to $4 and carries the larger negative delta (the bearish part), and sell the 300 put. That is a $15 wide put vertical for a debit near $5.70, maybe $5.80. Risk equals the debit, about $570. Break even is $309.30, only a few dollars below the current price and well inside what the options market is pricing for the month. The spread maxes out at the 300 strike and can roughly double. As a bought vertical, it expands in value quickly if the stock falls toward 305 or 300, which allows closing all or part of the position before expiration over the next 25 days.
