/Apple%20products%20on%20desk%20by%20Ake%20Ngiamsanguan%20via%20iStock.jpg)
Apple (AAPL) needs no introduction. The company has defined the consumer tech industry for decades and has gained a significant foothold in software, services, and entertainment in recent years.
However, dwindling iPhone sales, perceived lags in artificial intelligence (AI) innovation, and tariff uncertainties have resulted in the stock nosediving by nearly 15% in the year to date. Yet, with a gargantuan market capitalization of $3.2 trillion, it continues to remain the most valuable company in the world. And analysts at independent research firm Melius Research believe the 2025 correction has provided investors an opportunity to add Apple to their portfolios at a better valuation.
Additionally, murmurs of a foldable phone and a slimmer iPhone 17 variant have generated excitement. Let’s dive into these and other reasons for AAPL stock optimism now.
Consistent Outperformer
Over the past 10 years, Apple has grown its revenue and earnings at compound annual growth rates (CAGRs) of 7.07% and 8.02%, respectively.
Apple’s results for the most recent quarter were impressive as well with both revenue and earnings soundly beating Street estimates. In the first quarter of its fiscal 2025, Apple reported revenues of $124.3 billion which marked yearly growth of 4%. Both the Products and Services segments witnessed a rise, with the former coming in at $98 billion (+1.55% YOY) and the latter at $26.43 billion (+13.9% YOY).
Earnings for the quarter were at $2.40 per share, up 10% from the prior year and ahead of the consensus estimate of $2.35. Notably, this marked the eighth consecutive quarter of earnings beats from the company.
Although its net cash from operating activities fell from $40 billion in the previous year to $30 billion, it remained at substantial levels. Overall, the company closed the quarter with a cash balance of $30.3 billion which was much above its short-term debt levels of $11 billion.
Growth Engines
Apple’s robust fundamentals, seamlessly integrated product ecosystem, promising services growth, and industry-leading profitability position it as a compelling investment choice, with more than 2 billion active devices in use worldwide.
The company’s latest M4 MacBook Air strengthens its dominance in consumer technology, boasting performance twice as fast as the M1 version and up to 23 times faster than Intel (INTC)-based predecessors.
Further diversifying its product line, Apple recently introduced the iPhone 16e, its most affordable smartphone to date, priced at $599. The device delivers impressive specifications, including a 6.1-inch OLED display and Apple’s proprietary 5G modem. Notably, Apple claims users can achieve up to 52 hours of battery life under standard conditions.
On the tablet front, Apple’s iPad Air has received an internal upgrade, transitioning from the M2 to the M3 chip. While external changes remain minimal, Apple’s strategic decision to withhold Apple Intelligence from its base iPad models could drive demand toward higher-tier versions, effectively increasing the average selling price of its tablets.
Concerns surrounding Apple’s position in China are partially offset by its collaboration with Alibaba (BABA), a key e-commerce player in the region. Despite a 9.6% annual decline in shipments, Apple maintained its leadership in the Chinese smartphone market with a 17.4% share, demonstrating resilience in a challenging landscape.
An often-overlooked aspect of Apple’s long-term growth trajectory lies in its investments in medical technology which I have covered extensively here. Medical technology is an industry with significant potential that continues to evolve.
Additionally, Apple’s services division remains a crucial driver of expansion. Generating nearly $100 billion in revenue during fiscal 2024, the segment has consistently recorded growth between 11% and 17% over the past six quarters. Most recently, it posted a 14% increase in revenue, with profit margins improving to 73.9%, a significant rise from the 63.7% margin recorded in fiscal 2020. These factors collectively reinforce Apple’s position as a formidable player in the global technology sector, with multiple avenues for sustained growth.
What Are Analysts Saying About AAPL?
Overall, analysts have deemed Apple stock a “Moderate Buy,” with a mean target price of $250.83. This denotes upside potential of about 18% from current levels. Out of 36 analysts covering the stock, 17 have a “Strong Buy” rating, five have a “Moderate Buy” rating, 10 have a “Hold” rating, one has a Moderate Sell” rating, and three have “Strong Sell” ratings.
