Apple Inc. (AAPL): A Bull Case Theory

We came across a bullish thesis on Apple Inc. (AAPL) on Kontra Investment Xchange’s Substack by Kontra. In this article, we will summarize the bulls’ thesis on AAPL. Apple Inc.’s share was trading at $235 as of Oct 18^th. AAPL’s trailing and forward P/E were 35.77 and 30.96 respectively according to Yahoo Finance.

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Apple, a leading technology giant renowned for its iPhone, iPad, Mac PCs, and wearables, captures approximately 80% of the smartphone industry’s profits despite only representing about 20% of units sold. The iconic iPhone alone contributes around 50% of Apple’s revenue, with services making up about 20% and other hardware accounting for the remaining 30%. Established in 1977 and headquartered in Cupertino, California, Apple employs approximately 161,000 people globally. A favorable risk-reward scenario exists for the company, driven by its exceptionally sticky product ecosystem, steady growth in iPhone units due to stable replacement cycles, and robust expansion in services, fueled by increased user spending and global demand for wearables like AirPods. These factors are expected to enhance margins, reflecting Apple’s pricing power and favorable service mix. Additionally, Apple’s robust cash distribution strategy includes a strong expectation to return most of its net cash to shareholders over time through dividends and share buybacks. While potential risks like supply chain disruptions and exposure to China are present, Apple remains a reliable compounder, with a return on invested capital (ROIC) rising from the low-mid 20% range to the high-40% range and gross margins consistently above 38% over the last five years, affirming its attractive growth prospects.

Apple Inc. is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 184 hedge fund portfolios held AAPL at the end of the second quarter which was 150 in the previous quarter. While we acknowledge the risk and potential of AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.

Disclosure: None. This article was originally published at Insider Monkey.