Apple faces valuation test as September product cycle approaches

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Apple faces valuation test as September product cycle approaches

Margin quality moves into focus

The second key issue is margin quality. In the June quarter, Apple posted record revenue of $109.4 billion, up 16% y/y, and EPS of $2.02, but the overall gross margin of 50.1% received around 2 percentage points of support from tariff refunds, while EPS benefited by around $0.11. Without this effect, profitability would have looked noticeably less impressive.

For the next quarter, the company itself is guiding for gross margin of around 47-48%, with the expected positive effect from tariff refunds already falling to around one percentage point. At the same time, Apple explicitly points to higher costs in its reporting, including memory, so after the strong Q3 result the market will be watching closely to see how well the company can maintain product margin without one-off factors. Services remain the main stabilizer, with a margin of around 75.6%, but even here the figure did not increase year over year.

Treasury yields remain key valuation headwind

The third factor is currently outside Apple itself. Following yesterday’s inflation data, Treasury yields remain elevated: the 10-year yield is trading around 4.65-4.67% today, while the 30-year yield is near 5.17%. Despite some decline from recent highs, these levels continue to create problems for expensive technology stocks because they raise the discount rate applied to future cash flows.

For Apple, this is particularly sensitive after the strong expansion in its valuation: even with stable earnings, a further rise in the 10-year yield toward 4.70-4.75% could put renewed pressure on the P/E multiple. By contrast, a sustained decline in Treasury yields below 4.60% could give the market more room to re-rate AAPL higher.

$305-308 remains critical support zone

Thus, the coming weeks for AAPL look like a test of three components of the current valuation at once. September 9 should show whether the new iPhone cycle can support faster revenue growth; the next earnings report will show how sustainable margins are after the tariff benefit declines; and the bond market will determine what multiple investors are willing to pay for that growth.

As long as the stock holds above $305-308, the scenario of a recovery toward $315-320 remains valid, but a more sustainable move higher will require either a strong reaction to the September product launches or a noticeable decline in Treasury yields. Otherwise, as written in Apple faces new margin risks as inflation clouds near-term outlook, the $315-320 area may continue to act as a supply zone, while a break below $305 would once again increase the risk of a decline toward $300.

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