Is Apple Stock a Buy Right Now?

Apple (NASDAQ:AAPL) stock has soared this year, posting the best performance among the "Magnificent Seven," as investors shifted into stocks beyond the most aggressive artificial intelligence (AI) players. Though Apple developed AI features, known as Apple Intelligence, for its devices, it was slower to roll out AI than other tech giants.

Investors, in the earliest stages of the AI boom, aimed to buy shares of companies leading in this promising technology. But this year, concerned about the sustainability of AI spending, many investors shifted toward stocks such as Apple, as well as companies beyond the AI space. And this helped Apple stock climb 24%.

Apple has experienced other challenges, such as the increase in component prices, which pushed the company to raise its prices -- and Apple just reported earnings for the first full quarter with these new prices in place.

Against this backdrop, is Apple stock a buy right now? Let's find out.

Image source: Getty Images.

Early AI leaders

In recent years, as the AI boom gathered momentum, Apple lagged many other tech companies, from AI chip designer Nvidia to cloud giant Alphabet. These companies, as providers of AI products and services, immediately delivered revenue growth, and investors saw them as a way to bet on this exciting tech revolution.

At the same time, Apple faced other headwinds. Investors worried about the impact of import tariffs on its earnings as Apple manufactures heavily outside of the U.S. The company's efforts to increase the production of certain elements in the U.S. have led to exemptions, making tariffs less of a risk for Apple today. As mentioned, investors also worried that higher component prices would hurt earnings -- and the solution to this, raising prices, could do the same if that prompts consumers to postpone purchases.

However, Apple's earnings continued to advance, led by sales of its flagship devices from the iPhone to the Mac as well as services growth. And the fourth quarter, the first full quarter of the new higher prices, wrapped up Apple's "best fiscal year ever," according to new chief John Ternus. (Ternus, formerly Apple's senior vice president of hardware engineering, took over the chief executive officer position in September as Tim Cook retired.)

A new iPhone sales record

Quarterly revenue climbed 12% to a record of more than $114 billion, the iPhone reached a September quarter sales record, and services revenue reached an all-time high. Services revenue is particularly interesting because it transforms the purchase of an Apple device into a recurring revenue opportunity for the company.

Some investors were disappointed by Apple's gross margin forecast for the current quarter, in the range of 45% to 46%, which was lower than the 46.3% expected by analysts. Higher memory costs are a headwind, and this may continue as long as memory supply remains tight. But I don't see this as an element that changes Apple's long-term growth story.

Now, let's return to our question: Is Apple stock a buy right now? Apple's earnings performance over time has been positive, and the recent quarter continued along this path. An important point is that Apple just recently announced a batch of new products that could spur growth, particularly ahead of the holidays. Apple unveiled its iPhone Duo, its first-ever foldable phone, and its first touchscreen MacBook. The company is also launching the Apple HomeView smart display. And Apple's innovations are powered by a brand-new Siri AI.

These fresh products may drive revenue growth during the holiday season and beyond. Meanwhile, Ternus, with his strength in hardware, might make product innovation a focus, powering growth down the road. It's important to remember that Apple has a significant moat, or competitive advantage: its brand. More than 90% of U.S. iPhone users say they will stick with Apple when they are ready to upgrade, according to Statista.

Trading at about 35x forward earnings estimates, Apple isn't dirt cheap. But this level still offers the stock room to run, and the company's combination of safety -- it isn't one of the bigger AI spenders -- and growth may appeal to a great number of investors. All of this makes Apple a fantastic buy right now.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.