Apple has recently achieved a significant milestone by surpassing a $5 trillion market capitalization, driven by extraordinary demand for its new foldable iPhone and a robust lineup of products including the Homeview smart hub and updated MacBook Pro models.
The company reported that pre-orders for the iPhone Duo were so high that delivery times were pushed back to late January shortly after they opened. This strong hardware momentum is complemented by Apple's advancements in software, particularly with its AI capabilities, which have not required the heavy capital expenditures seen by other tech giants.
Apple's anticipated revenues for fiscal year 2027 are projected to exceed $500 billion, with expected EBITDA of over $180 billion and a relatively low capital expenditure of $13.5 billion, resulting in an impressive forecast of $156 billion in free cash flow.
However, the primary concern for investors is Apple's high valuation, trading at nearly 36 times the fiscal year 2027 earnings per share estimate of 9.59, which is above its long-term average.
To navigate this high valuation, a suggested trading strategy involves a call spread risk reversal, where investors buy February 360 calls while selling December 310 puts and December 375 calls to offset costs. This strategy allows investors to potentially benefit from price stability while managing the risks associated with high valuations