Is Apple stock worth buying, selling or holding in 2025?

Apple (NASDAQ:AAPL) recently completed fiscal 2024 with a fourth-quarter profit, and the market responded with a shrug. The stock is down a few percentage points since its previous earnings report, but there’s nothing to sound alarm bells about. After all, the stock is up 25% in the last 12 months. That’s not bad for a stock with a whopping $3.3 trillion market capitalization.

However, one of Apple’s largest investors Berkshire Hathawayalso reported earnings. Berkshire, managed legendary investor Warren Buffettcontinues to reduce its stake in Apple; the value of that stake has fallen from more than $170 billion to just $66 billion today.

Investors must make their own decisions. However, I understand. Buffett is perhaps the biggest name on Wall Street, so it’s tempting to think about the steps his company is taking when weighing buying, selling or holding stocks for itself.

The reality is that the reasons Berkshire sold Apple likely have nothing to do with you. I’ll cover Berkshire’s sell-off, what really matters for Apple stock, and whether to buy, sell, or hold the stock as the market heads toward 2025.

Selling Apple makes sense for Buffett, and why it probably doesn’t matter to you

Yes, Berkshire Hathaway sold more than half of its Apple shares. But that doesn’t mean Buffett’s company no longer believes in Apple’s potential. Buffett has repeatedly praised Apple and called it a better business than American Express And Coca-Colatwo of Berkshire’s oldest investments, earlier this year.

It should be noted that Apple shares have become significantly more expensive since Buffett first bought them. price/earnings ratio (P/E) has grown steadily over the past eight years:

PE Ratio AAPL data on YCharts

This may have influenced Buffett’s timing to reduce Berkshire’s stake in Apple, but in my opinion it should have happened anyway. Apple’s share has grown to almost 20% of Berkshire’s market capitalization earlier this year. Berkshire is essentially a trillion-dollar portfolio of privately held businesses and stakes in public companies. Having that much value tied up in one asset is risky.

Cashing in some of those chips at such a high profit made sense for Buffett. However, I don’t think we should weigh too heavily on people deciding whether to own Apple or not.

Explaining Apple’s Higher Valuation

Yes, Apple is more expensive now than it was ten years ago. However, Apple’s business has changed. Its iOS devices (primarily the iPhone) have created a huge customer base to which it sells highly profitable subscription services. Revenue from these services accounted for about 24.5% of total sales in 2024, up from 22.2% in 2023.

Selling more services and outsourcing its supply chain made Apple a more efficient business with much higher revenue. return on invested capital (ROIC). This helps explain why Apple’s valuation has risen so much…it’s a fundamentally better business today.

AAPL Return on Invested Capital data on YCharts

In this light, I don’t think Apple shares will trade at 12 times earnings like they have previously, barring some collapse in the broader markets.

Apple: buy, sell or hold?

But that doesn’t mean the stock is a bargain today. A more efficient Apple can make more money with less capital, but ultimately the stock’s valuation needs to make sense for the growth in profits you make.

Apple hopes Apple Intelligence recruits artificial intelligence (AI) The features implemented in iOS 18 will help keep devices updated. Apple reported 6% year-over-year revenue growth in the fourth quarter, but targets low to mid single digit growth next quarter. Honestly, it’s still early. Apple released Apple Intelligence just a couple of weeks ago, so it will take time to make an impact on the company’s performance.

Apple earned $6.08 per share in 2024, and analysts currently forecast earnings per share to rise 21% to $7.40 in fiscal 2025 (ending September 2025) and another 11% to $8.25 next year. Analysts estimate Apple will grow earnings by about 12% annually over the next three to five years. Apple is such a good business that it earns a premium over most other companies, but it’s hard to rely on the stock any longer at this price. PEG ratio around 3. In other words, Apple’s valuation is too high for expected earnings growth.

Apple is too good a business to sell, but investors should probably wait to buy until its valuation drops or there is more confidence in Apple’s growth prospects. Consider the stock suspended today.

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American Express is an advertising partner of Motley Fool Money. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has disclosure policy.