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Apple‘s (NASDAQ: AAPL) made loyal shareholders an absolute fortune over the past couple of decades. However, the stock’s been underperforming more recently. It’s down 14% year to date and 2.3% over 12 months.
I’m one of around 1.56bn iPhone users worldwide. And barely a day goes by when my AirPods aren’t lodged in my ears at some point, often when I’m listening to something on Apple Music.
It’s the same with double-clicking my iPhone to pay for something using Apple Pay. Meanwhile, my daughter wants an iPad for her upcoming birthday. Those aren’t cheap.
In other words, the brand and technology are woven deeply into my daily reality. But should I buy the stock for my ISA while it’s down? Let’s discuss.
Apple has a solid core
There are a few immediate things that make Apple an attractive investment proposition in my mind. Obviously there’s the iconic brand and massive customer base, as I’ve just mentioned.
Beyond that, I take great comfort in the firm’s fortress balance sheet. It had nearly $50bn in cash and short-term investments at the end of March. This gives the company plenty of ammo to pay down debt, fund share buybacks, or even make an acquisition.
It also allows Apple to weather any storm that comes its way. And with President Trump’s on-off tariffs, a big storm’s blowing right now.
Given these challenges though, I like the continuity at the top of the company. Tim Cook’s been CEO since co-founder Steve Jobs resigned in 2011 due to health issues. In the eyes of most, Apple still remains one of the best run companies in the world.
Lack of AI innovation
On the other hand, I have some reservations when I look at Apple today. One is slow growth, with just a 2% revenue gain last year. When compared to other tech giants such as Microsoft (+15.7%), Amazon (+11%), Alphabet (+13.9%) and Meta (+21.9%), that’s underwhelming.
Related to this, Apple’s been sluggish so far in developing a convincing artificial intelligence (AI) strategy. The touted cycle upgrade in iPhones driven by AI has simply never materialised.
Now, some of this may be due to the vast sums currently being spent building out AI infrastructure and services. The company may be playing the long game, seeing how things develop before moving aggressively when it identifies where the best growth opportunities lie.
In time, this patience might even be looked upon as a stroke of genius on Apple’s part.
Nevertheless, I would have expected a state-of-the-art Siri by now (ie one with a generative AI brain). Has Apple lost its mojo when it comes to product innovation? This is a niggling doubt I have.
Finally, the valuation doesn’t look attractive to me. Based on forecasts for this year, the stock’s trading at 27.4 times forward earnings and 8.1 times trailing sales.
We don’t know what’s happening with US tariffs yet, as many Asian countries (where Apple manufactures its devices) still haven’t signed a trade deal. Apple’s earnings could have a big bite taken out of them.
My move
Given this uncertainty, I’m not really keen to add the stock to my portfolio. I’d prefer to invest in other companies where the growth opportunities seem more obvious to me.
