As Apple Inc. approaches its all-time high, a series of mounting challenges have emerged. I’ll review an options trade that pays off if shares of the iPhone maker remain stuck or move lower. The latest iPhone 16 has not met sales expectations, signaling a more selective consumer. Additionally, AAPL faces stiff competition in their singular bet on the future of augmented reality, where rivals are putting pressure on the future of Apple’s Vision Pro. Moreover, Apple’s venture into artificial intelligence has been lackluster, failing to match the innovation of competitors who are setting the standard in AI. (Note, Apple just announced the release of a new value-priced iPhone that runs Apple Intelligence, but the stock is not responding.) Compounding these issues, the economic slowdown in China, a critical market for Apple, is dampening sales further. And with AAPL trading at a lofty 65% premium over its peers, it’s becoming increasingly untenable given an outlook that lacks the dynamism to justify such a premium. This puts AAPL in a spot of vulnerability, suggesting that a breakout to new all-time highs here is less likely. If we look at the chart of AAPL, it has underperformed the S & P 500 since hitting a new all-time high in December and has continued to print a series of lower lows and lower highs. This suggests that the stock might be due for a correction, especially considering its position near the top of its trading range. And if we look at the business, AAPL’s valuation is hard to justify, trading at an 65% premium relative to its peers, despite growth metrics that are only in line with the industry. While its superior profitability has historically justified a premium valuation, recent slowdown in revenues and EPS growth puts this at significant risk. Forward PE Ratio: 33x vs. Industry Median 20x Expected EPS Growth: 11% vs. Industry Median 10% Expected Revenue Growth: 6% vs. Industry Median 6% Net Margins: 24% vs. Industry Median 13% The trade Without an immediate catalyst on the horizon, my preference is to take a bearish to neutral outlook by harnessing options premiums by selling an Apr 4, $245/260 call vertical @ $5.74 Credit. This involves: Selling the April 4, $245 Call @ $8.00 Buying the April 4, $260 Call @ $2.26 View this Trade with Updated Prices at OptionsPlay The maximum reward is $574 if AAPL is below $245 at expiration. The maximum risk is $926 if AAPL rises above $260 at expiration. The breakeven point for this trade is at $249.74. This call vertical strategy leverages the anticipated pullback in AAPL’s stock price with limited risk. With AAPL’s current technical setup and premium valuation, this options trade aligns with the bearish thesis, providing a way to profit from a either a neutral or bearish outlook with defined risk. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
