Fiscal first-quarter results from Apple (NASDAQ:AAPL) on Jan. 28 certainly looked good enough. Investors bid up Apple stock a little over 2% after the company’s headline numbers nicely beat Wall Street expectations.

The positive reaction to earnings has eased some of the pressure on Apple amid coronavirus fears, and the reaction does make some sense. Q1 results support the longer-term bull case for Apple stock, which rests on the growing importance of the company’s services revenue.

That said, Apple stock has soared, delivering a literally unprecedented rally over the past thirteen months. And looking closer at earnings in that context of the stock’s new, higher, valuation, there is one reason for concern.

Apple Earnings Look Spectacular…

From a headline standpoint, Apple delivered a blowout Q1. Revenue and earnings per share set new records. Both figures crushed Wall Street estimates. Revenue growth was particularly impressive, coming in about four points better than analysts expected. Guidance for the second quarter was solid as well, coming in nicely ahead of consensus.

Expectations aside, the quarter seems to point Apple stock toward new all-time highs. On a year-over-year basis, revenue increased 9% in the first quarter — and adjusted earnings per share increased by 19%.

Even after the huge rally from January 2019 lows, AAPL seems downright cheap relative to that type of growth. Shares trade at less than 20x fiscal 2021 consensus EPS estimates, and closer to 18x when backing out the company’s $100 billion-plus in cashless debt.

In this bull market, there simply aren’t many stocks valued at less than 20x earnings that are delivering 10% profit growth, let alone 19%. And so Q1 looks like another piece of evidence to support the long-running argument that Apple stock simply has been too cheap — and still is.

…But Mind the Comparison

There’s one important thing to keep in mind relative to numbers for the first quarter of fiscal 2020. Year-over-year growth rates are calculated in comparison to the company’s performance in Q1 FY19 — and that quarter was one of Apple’s worst in many years.

Apple even took the rare step of reporting preliminary results ahead of time to warn investors of the disappointment. Apple stock declined almost exactly 10% the following day. It’s gained 123% since. In those thirteen months, Apple has added nearly $800 billion in market value along the way, a figure greater than the combined values of Facebook (NASDAQ:FB) and Boeing (NYSE:BA).

That rally has moved Apple stock back toward being priced for reasonably consistent growth. That seems reasonable after Q1. But, again, the comparison against the ugly Q1 FY19, in which revenue declined 4.5% year-over-year and operating income dropped 11%, skews the reported growth rates for the most recent quarter.

Taking a step back and looking at Apple’s two-year growth rates, recent performance looks much less impressive. Revenue has grown 9% over that stretch, a solid if unspectacular rate. But gross profit dollars have increased less than 4%, admittedly with tariffs a contributing factor.

The concern is that Apple has spent up to drive even that modest growth. Operating expenses inflated 26% between Q1 FY18 and Q1 FY20. As a result, operating profit actually fell 2.7% between the two periods.

When removing the beneficial comparison caused by last year’s disappointing first quarter, Apple’s growth rates suddenly look much less impressive. That, in turn, leads to two core risks.

The Two Risks for Apple Stock

The first risk is short-term in nature: Apple’s comparisons are going to get more difficult. Second-quarter numbers in late April will look solid, given that year-prior sales dropped over 5% year-over-year. After that, however, Apple returned to growth in the second half of fiscal 2019. That alone suggests that all else being equal, reported growth rates will slow in the second half of this fiscal year.

Admittedly, for a stock as well-covered and widely-owned as Apple, that risk would seem embedded in the stock price. But AAPL stock has been surprisingly correlated to iPhone upgrade cycles in the past. When Apple’s revenue and profits grow faster, even on a quarterly basis, Apple stock tends to do better.

That theoretically shouldn’t happen in a forward-looking market, but it has. If revenue growth slows to the low-single-digits or worse in Q3, AAPL simply may not look as attractive to some investors, particularly near 20x forward earnings.

The second risk is the same long-term concern that’s underpinned some of that volatility: skeptics question whether Apple can grow consistently in the future.

The iPhone remains the core product here, driving 61% of first-quarter revenue. That product also drove more than 100% of the company’s revenue beat relative to analyst expectations. iPhone sales already have stalled out, and bears worry that “commoditization” and longer replacement cycles will drive declines in the future.

Looking at broader growth rates, that case still needs to at least be taken seriously. Apple’s aggressive share repurchases drive earnings per share growth, and tax reform lowered its corporate rate. But operating profit has been going mostly sideways for a couple of years now, as it did in Q1 on a two-year basis.

That lack of growth is why AAPL on occasion has traded down toward a valuation around 11-12x earnings excluding its net cash. Taking the broader view of last week’s results, Apple still hasn’t proved consistent, multi-year growth is on the way.

No Need to Panic

To be sure, those risks don’t necessarily suggest impending doom, or even a reversal, for Apple stock. A bounce back in iPhone sales ahead of 5G launches suggests that the product’s long-rumored demise isn’t on the way yet; 17% year-over-year growth in Services revenue shows that business continues to perform well.

The Wearables, Home and Accessories segment generated a whopping $10 billion in revenue in Q1, thanks to products like AirPods and the still-fast-growing Apple Watch. Operating profit growth has been dented by investments in Apple TV+, which leaves room for margins to improve in the future. There’s plenty of good news here and a valuation that is far from prohibitive.

Still, after turning bullish on AAPL last year, I argued in December that gains were likely to slow. Q1 doesn’t dispel that argument, as impressive as the headline numbers look.

Even among large-cap tech names, investors may well choose the faster growth and higher valuations of Facebook, Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL), or even Alibaba (NYSE:BABA) over AAPL. At the very least, this is not a risk-free trade.

Of course, no trade is. And as long as U.S. stocks stay positive, Apple stock likely will as well.

As of this writing, Vince Martin has no positions in any securities mentioned.