One of the main pillars of the bearish thesis on Apple stock is the rich valuation. But compared to the peer group, maybe AAPL is not so pricey after all.

Apple stock is considered a buy by the majority of analysts that cover the name. According to TipRanks, more than 80% of Wall Street experts think that owning shares is a good idea, while only one analyst has a sell rating on the stock.

Among skeptics, one of the main arguments against owning AAPL is the elevated P/E ratio. But a closer look at the peer comparison suggests that Apple stock may be more affordable than many seem to believe.

Figure 1: Is Apple Stock Overvalued? What The Peer Comparison Says

Apple’s valuations: fair, too rich, or a bargain?

The following graph probably explains why so many value investors are cautious about Apple stock today. Notice what has happened to AAPL’s price-to-earnings (or P/E) ratio over the past 10 years:

Figure 2: Apple's valuation.

Starting a couple of years after the launch of the original iPad, Apple’s P/E fluctuated between 10 and 20 times for a few years. Then, beginning in 2019, the valuation multiple skyrocketed to as high as 44 times early last year, settling now to just below 30 times.

The multiple expansion happened for a few reasons, the most relevant of which was probably Apple’s business model shift to higher-margin and more predictable services. The post-iPhone X success of Apple’s smartphone segment, along with the company’s generous cash return policy, probably helped too.

But tech companies, especially those in high growth stages of their lifecycles or whose “moats” are considered wide, tend to command high P/Es. Take a look at the following table comparing some of Apple’s key valuation metrics with those of peers selected by Stock Rover: