Key Points
Apple (NASDAQ:AAPL) shares are roughly $350 as I write, close to their all-time high and up about 29% so far in 2026.
Netflix (NASDAQ:NFLX) shares, meanwhile, reached their one-year low on Oct. 29. Near $62 today, the stock is about 54% below the record close it set in June 2025 (adjusted for the company’s 10-for-1 stock split last November).
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On valuation, Netflix wins easily. Using analysts’ forecasts for 2027, Netflix’s price-to-earnings ratio is around 17. Apple’s, based on expected earnings for its fiscal 2027 (the year ending next September), is about 37. And Apple’s own guidance suggests slower growth for the quarter it reports on Nov. 2.
But I don’t think the cheaper stock is automatically the better buy. What each company may earn several years from now counts more than its price today.
Image source: Getty Images.
Netflix: cheaper, and still slowing
Netflix’s growth has eased all year. Revenue rose 17.6% year over year in the fourth quarter of 2025, then slipped to 16.2% in the first quarter of 2026 and to 13.4% and 11.8% in the next two quarters. And management’s guidance points to 11.5% in the fourth quarter.
Granted, earnings are still climbing. Management sees the company’s operating margin rising to 31.5% this year from 29.5% in 2025. And the streamer spent a record $4.8 billion on buybacks in the third quarter.
Still, margin gains can get tougher to find when sales growth keeps slowing. Investors arguably pay less for every dollar of Netflix’s earnings because it isn’t clear yet where its growth will settle.
A cheap price-to-earnings ratio for a slowing business isn’t the same as a bargain.
Apple’s staying power
Apple has been growing fast. Revenue climbed 16% year over year in the fiscal first quarter of 2026 (the period ended Dec. 27, 2025), then accelerated to 17% in fiscal Q2 before landing at 16% in fiscal Q3.
But a slowdown is coming. For fiscal Q4, management forecast growth of just 9% to 11%, citing currency and tight supply of the advanced chips in its devices.
For that premium, though, Apple investors get things Netflix can’t offer.
Showing how sticky the business is, Apple’s installed base now tops 2.5 billion active devices. Its services business, which sells subscriptions and more to these users, hit record June-quarter revenue of $30.7 billion in fiscal Q3, up 12% year over year.
Services have far higher margins than hardware, too — they made up about 28% of Apple’s fiscal Q3 revenue but about 42% of its gross profit.
Also, Apple keeps handing cash back to shareholders. In the first three quarters of fiscal 2026, it spent around $62 billion on buybacks and about $12 billion on dividends. Operating cash flow in that time grew 43% to about $117 billion.
Apple has much more to sell
Apple has hardly started charging for artificial intelligence (AI). Its new Siri AI assistant began rolling out in beta on Sept. 14, and management has hinted at how it could earn money from heavy users.
“We will have some kind of upgrade possibilities on iCloud+ where people can buy up the stack on iCloud+,” then-CEO Tim Cook said on the company’s fiscal third-quarter earnings call.
With over 2.5 billion devices in use, even a small share of owners paying for extra AI features might add up.
AI could also give Apple new devices to sell. HomeView, a 7-inch home device built around Siri AI, starts shipping Nov. 13. And Apple reportedly plans to ship its first smart glasses in late 2027.
There’s also the iPhone Duo. Apple’s first foldable went on sale Oct. 23 starting at $1,999, or $700 more than the iPhone 18 Pro Max. This adds a pricier tier to Apple’s most important product line, which pulled in $54.3 billion of revenue in fiscal Q3, up 22%.
Which one would I buy?
Netflix might still work out fine. At a price-to-earnings ratio around 17, Netflix doesn’t need much to go right. And Apple’s Nov. 2 report could disappoint, given management’s cautious guidance.
But I’d rather pay up for Apple. Its installed base and services business make it the more durable of the two. I also think most of AI’s payoff for Apple is still ahead, both in features people might pay for and in new devices like HomeView. The iPhone Duo, meanwhile, gives the iPhone a pricier top end.
Apple is the one I’d buy. At a price-to-earnings ratio around 37, though, I’d probably build a position gradually.
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Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Apple and Netflix. The Motley Fool has a disclosure policy.
