3 reasons to buy Apple stock like there's no tomorrow

Don't make sweeping conclusions just yet about the ho-hum interest in Apple Intelligence.

| More on:
an apple with a leaf on its stem has a heart shaped bit taken from it

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There's no denying that Apple (NASDAQ: AAPL) is such a commonly suggested stock pick that it's almost become cliché. Almost. The fact is, whether it's a predictable pick or not, the consumer tech giant deserves a place in most people's portfolios for a range of reasons.

Three of these reasons stand out among all the rest right now.

1. Its AI entry is still miles away from reaching its full stride

Although the unveiling of Apple Intelligence in June of last year was met with great fanfare, interest in this artificial intelligence (AI) technology has been underwhelming.

Specifically, despite the tech launching in October to work with the iPhone 16 that became available just a month earlier, the company didn't see the expected swell of smartphone demand during the final calendar quarter of 2024. IDC says iPhone unit shipments actually fell 4% in the fourth quarter of last year.

It's far too soon to call Apple Intelligence a bust as a growth driver though. Consumers may simply need a little more time to learn about the features and benefits of Apple's generative AI tech.

And it may take even more time for consumers and investors alike to fully appreciate how Apple's artificial intelligence platform is (or eventually will be) a vertically integrated ecosystem capable of offering complete privacy to its users. That just means all the required computing is handled by the properly equipped device itself, or by Apple's own private artificial intelligence servers.

This is in contrast with apps like ChatGPT or Google's Gemini, which currently punt all of this work to a cloud that may or may not be secure. Apple is even working with Broadcom to develop its own processing chips capable of powering AI servers, further privatising its in-house AI by taking third-party chips out of the equation.

Whatever Apple's future generative AI offering ends up looking like, it stands to be a game changer. Precedence Research suggests the global generative AI industry is set to grow at an annualised pace of 44% through 2034.

2. It's (finally) thinking outside the box to drive growth

While Apple is positioning itself to offer a truly private AI experience, it's still being pragmatic about it. It will only make such tech available where it's allowed and feasible to do so. In other somewhat closed markets that may be wary of being left out of the loop, so to speak, it's willing to entertain alternative arrangements.

Case in point: On Thursday of last week, China's e-commerce giant Alibaba announced will be the name providing generative AI support to iPhone owners in this enormous market. In the meantime Apple will also continue to work with China's top search engine, Baidu, on the artificial intelligence front. These are partnerships that were at least a little less likely for a somewhat isolationist Apple just a few years back.

Were it just these two seemingly unlikely agreements, it might be dismissible as the inevitable and only way to reignite iPhone demand in China. This isn't the only new growth strategy Apple's employing though. On Tuesday of last week, the company also announced its Apple TV app is now available to Android users, presenting this crowd with a chance to enjoy programming that was once exclusively available to Apple TV+ subscribers.

It's probably not a game changer in and of itself. It does point to creative and open-minded thinking of ways to expands its reach, however. Don't be surprised to see more growth-driving initiatives in the foreseeable future, particularly ones that grow its high-margin services (apps and digital content) arm.

3. It's a ridiculously profitable, value-creating company

Finally, the best reason to buy the stock like there's no tomorrow is the same reason to have owned Apple stock for the better part of the past couple of decades. That's its sheer dominant size and persistent profitability.

Sure, say what you want about Apple's slowing growth before the COVID-19 pandemic, and outright stagnation since its sales peak in 2022. Net income hasn't really grown any since then either. Blame the iPhone, mostly, which still accounts for about half of Apple's total revenue.

AAPL Revenue (TTM) Chart

AAPL Revenue (TTM) data by YCharts

Just don't lose perspective. Apple remains the world's biggest publicly traded outfit for a reason. The bulk of that reason is the fact that it also remains the world's most profitable company, reporting net income of nearly $94 billion for its fiscal year ended in September. Between that and its $140 billion worth of cash and near-liquid assets on its balance sheet, it can fund a variety of competitive efforts against rivals that would easily qualify as an unfair fight.

In the meantime the company continues to fund a long-standing streak of stock buybacks, reducing this count from more than 26 billion issued and outstanding shares as of 2012 to a 25-year low of just over 15 billion shares now.

If nothing else, this company's just got too much financial muscle and momentum for anything to stand in its way. It's just a matter of time before it finds the right growth lever to pull, if it hasn't pulled it yet.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

James Brumley has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, and Baidu. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Alphabet and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Prediction: These 2 AI stocks will rebound in the 2nd half

One of these stocks finished the first half unchanged, and the other fell in the double-digits.

Read more »

Person using a remote to flick through Netflix.
International Stock News

Can Netflix stock double by 2028?

The stock has skyrocketed, gaining more than 500% over the last three years.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Up 1,590%, should you buy Nvidia at its all-time high?

The demand for Nvidia's GPUs isn't letting up, which is driving strong revenue and profit growth.

Read more »

Woman and man calculating a dividend yield.
International Stock News

Prediction: This could be Meta's next big move (and it may happen on July 30)

My prediction is this could be the tech giant's next major move.

Read more »

A tech worker wearing a mask holds a computer chip.
International Stock News

Nvidia chips are flowing to China again — what that means for AI adoption trends

The U.S. government just changed its rules to allow Nvidia to ship its H2O chips to China.

Read more »

Green apple with US hundred dollar bill printed on it.
International Stock News

Should you buy or sell Apple stock before July 31? The answer may surprise you

The technology giant now has a market cap of $3.1 trillion.

Read more »

Woman and man calculating a dividend yield.
International Stock News

Is Nvidia stock a buy now?

Here's a look at whether it's too late to buy the first $4 trillion company.

Read more »

Man holding fifty Australian Dollar banknote in his hands, symbolising dividends, symbolising dividends.
International Stock News

This trillion-dollar artificial intelligence (AI) stock could double your money in 5 years

The tech leader is making moves, and if enough things go right, these initiatives could lead to superior returns in…

Read more »