Apple Inc. (NASDAQ:AAPL) remains the most valuable company globally, with a market capitalization of $3.2 trillion, despite its recent downturn. However, Apple stock has fallen by nearly 15% year-to-date due to declining iPhone sales, lagging AI innovation, and ongoing tariff uncertainties.

Analysts at Melius Research view this correction as an opportunity for investors to buy Apple stock at a better valuation. With consistent financial performance, an expanding product ecosystem, and robust services growth, AAPL remains a solid long-term investment.

Consistent Performance Despite Challenges

Over the past decade, Apple has delivered impressive growth, with its revenue and earnings increasing at compound annual growth rates (CAGRs) of 7.07% and 8.02%, respectively.

In the first quarter of its fiscal 2025, Apple reported revenue of $124.3 billion, reflecting 4% year-over-year growth. Both the Products and Services segments contributed to this growth, with Products generating $98 billion (+1.55% YOY) and Services contributing $26.43 billion (+13.9% YOY).

Apple’s earnings per share (EPS) stood at $2.40, marking a 10% increase from the prior year and surpassing the consensus estimate of $2.35. This also marked Apple’s eighth consecutive quarter of exceeding analyst expectations.

While net cash from operating activities declined from $40 billion to $30 billion year-over-year, Apple’s cash reserves remain strong at $30.3 billion, comfortably covering its short-term debt of $11 billion.

Apple’s Growth Engines and Innovations

Apple’s ecosystem, with over 2 billion active devices globally, continues to drive revenue and profit growth.

New Product Launches Strengthen Market Position

The introduction of the M4 MacBook Air has reinforced Apple’s dominance in consumer technology. The M4 chip offers performance twice as fast as the M1 model and is up to 23 times faster than Intel-based (NASDAQ:INTC) predecessors.

Apple also launched its most affordable smartphone, the iPhone 16e, priced at $599. It features a 6.1-inch OLED display and Apple’s proprietary 5G modem, offering up to 52 hours of battery life under standard usage conditions.

On the tablet front, Apple upgraded its iPad Air by transitioning from the M2 to the M3 chip. Although external design changes were minimal, withholding Apple Intelligence from the base models could drive demand toward higher-tier versions, increasing the average selling price.

Apple’s Growing Services Division

Apple’s services segment remains a key revenue driver, generating nearly $100 billion in fiscal 2024. Over the past six quarters, this segment has shown consistent growth between 11% and 17%, with a 14% revenue increase in the most recent quarter.

Profit margins for the services division have also surged to 73.9%, a significant improvement from 63.7% in fiscal 2020. With recurring revenue from subscriptions and digital services, Apple’s services arm continues to provide stability and high-margin growth.

Strategic Moves in Medical Technology and AI

Apple’s investments in medical technology also offer promising long-term growth potential. By integrating health-tracking features into its devices and expanding its capabilities in medical research, Apple is positioning itself to capitalize on the growing healthcare technology market.

Additionally, while Apple has faced criticism for lagging in AI innovation, rumors of a slimmer iPhone 17 and a foldable model have generated excitement, potentially reinvigorating interest in future product cycles.

Apple’s Position in China and Collaboration with Alibaba

Concerns about Apple’s market share in China have been alleviated through its partnership with Alibaba (NYSE: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.

What Are Analysts Saying About Apple Stock?

Analysts remain bullish on Apple stock (NASDAQ:AAPL) despite the recent dip. The consensus rating stands at “Moderate Buy,” with an average price target of $250.83, implying an 18% upside potential from current levels.

Out of 36 analysts covering the stock:

17 have a “Strong Buy” rating.

5 have a “Moderate Buy” rating.

10 have a “Hold” rating.

1 has a “Moderate Sell” rating.

3 have “Strong Sell” ratings.

Should You Buy Apple Stock Now?

With Apple’s strong financials, innovative product line, and rapidly growing services division, the current dip presents a compelling buying opportunity. Analysts see significant upside potential as Apple continues to dominate the global tech landscape.

Given the combination of consistent earnings growth, innovative product launches, and a dominant services segment, Apple stock appears well-positioned to rebound, making it an attractive option for long-term investors.

 

Featured Image: Unsplash © Laurenz Heymann

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