Apple (NASDAQ:AAPL) shares are in the red today amid reports that rising memory costs could result in higher prices for the iPhone 18, while a Jefferies report indicated disappointing prospects for an all-glass iPhone. However, Gene Munster, managing partner at Deepwater Asset Management, said in a recent program on CNBC that he still feels good about Apple and remains bullish on the stock.
Munster believes a potential increase in iPhone prices could actually help boost Apple’s revenue growth, with limited impact on demand. At the core of his argument is his expectation of a strong upgrade cycle for Apple’s iPhone business, which he believes could drive higher sales over the next several quarters. He also sees a broader consumer hardware upgrade cycle driven by personalized AI beginning around 2027, which he believes could create another major growth opportunity for Apple.
“There’s going to be a massive upgrade cycle around consumer hardware,” Munster said. “That’s probably going to start 27 mid to late 27 and probably go for a few years. And that’s based on personalized AI. That’s going to do inference on device that’s going to benefit Apple, that’s going to benefit other hardware makers. And so when you put this together, I think shares are undervalued. And I think we’re going to see a strong next 12 months.”
Not all is good for Apple. The stock trades at around 35x forward earnings while growth is decelerating. Revenue growth is expected to fall back to single digits in FY27 once the current upgrade cycle matures. Q4 guidance already shows the slowdown starting, with revenue growth of 9% to 11% versus 16% in Q3. That makes Apple the slowest grower in the Magnificent Seven outside Tesla, yet it trades at the highest multiple. Meta grows over 20% at roughly 19x forward earnings. Alphabet trades at 18x. Amazon at 23x. Microsoft at 25x. Apple is at 35x.
Apple is losing the AI race and outsourcing its way through it. The new Siri runs on Google’s Gemini model. Apple reportedly pays around $1 billion a year for it. Microsoft, Alphabet, and Amazon have ways to monetize their cloud platforms. Apple is renting intelligence from a direct competitor and has no clear way to make money off it.
Photo by AlphaTradeZone
Apple’s reliance on iPhone revenue remains its biggest weak point. The iPhone still brings in close to half of all sales. The rest of the hardware lineup isn’t showing strong growth. Mac makes up 9.5% of sales and has grown just 3.3% a year over five years, with roughly no growth in the past twelve months. iPad is 5.5% of sales and still sells less than it did before COVID. Wearables, home, and accessories account for just over 7% of sales and are up only 2% this year, after a first quarter that fell 2.2%. So if iPhone demand slows, no other hardware category is big enough or growing fast enough to cover the gap.
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