Apple: Navigating Tariffs while Services Drive Growth

Apple Company Overview

Co-founded by the late, great Steve Jobs, Zacks Rank #3 (Hold) stock Apple (AAPL) is one the world’s leading tech juggernauts. The Cupertino, California-based company is best known for its iPhone smartphone, which dominates the smartphone market, garnering more than a 50% market share in the United States. In addition to the iPhone, Apple is a leader in other hardware products such as its ‘Macbook Pro’ and ‘Macbook Air’ laptops and its wildly popular ‘Airpods’ wireless headphones. Beyond hardware, Apple has diversified its business into other areas such as the Apple Watch, Apple Music, the App Store, iCloud, Apple TV, Apple Pay, and AI.

Apple Scores Tariff Exemption

When you’re one of America’s largest and most successful companies, you garner access to the White House. AAPL shares cratered more than 20% in the two weeks following US President Donald Trump’s ‘Liberation Day,’ where the US levied hefty tariffs on Apple’s largest supplier and manufacturer outside the United States. That said, longtime Apple CEO Tim Cook has expertly navigated the situation, striking a deal earlier this month with President Trump to avoid tariffs on key Apple products by pledging $600 billion to domestic investments into manufacturing.

Apple Services, New iPhone to Bolster Growth

Apple’s Services is a primary growth driver for the company. Over the past decade, the segment has grown more than 400%, and continues to grow at a double-digit clip as areas like Apple Pay continue to be adopted by customers. Apple Pay, in particular, provides an opportunity for much more growth into the future. The contactless payment technology has expanded into several international markets like Europe, Asia, and Latin America. Additionally, Apple iPhone users can add drivers’ licenses and states IDs to their Apple Wallet in several states. Meanwhile, the latest version of Apple’s iPhone is expected to be announced next month and should reignite growth in the company’s biggest revenue driver. Overall, Apple is one of the steadiest, predictable, and consistent earnings growers on Wall Street.

Apple’s Underrated AI Segment

Apple has a poor reputation due to the lack of capabilities observed by many customers of its ‘Siri’ personal assistant. However, behind the scenes, Apple has acquired numerous AI-related start-ups to bolster its offering and plan for the coming AI revolution. Additionally, Apple has inked a strategic partnership with AI leader OpenAI to integrate ChatGPT into its ecosystem.

Apple has a Pristine Balance Sheet and a Massive Cash Hoard

Apple’s highly profitable businesses throw off more cash than almost any company on Wall Street. The company is sitting on more than $50 billion in cash. This cash hoard allows the company to buy back shares (making for a more favorable supply/demand balance for the stock) and continue to make strategic AI investments.

AAPL Technical View: Long-Term Reversal

Amateur investors often conflate technical with being short-term focused. However, I have learned that the long-term price action can smooth out the action and block out the noise. AAPL shares show a massive “hammer” reversal on the quarterly chart. Such a pattern suggests that the stock should see new all-time highs by early 2026.

Furious Call Action in AAPL

Deep-pocketed options traders have been buying far out-of-the-money AAPL calls by the millions recently, signaling high confidence that shares will be much higher in the coming months.

Bottom Line

AAPL is one of the steadiest growers on Wall Street. Tariff exemptions, the new iPhone, and a rapidly growing services business mean that this stock favors the bulls.  

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This article originally published on Zacks Investment Research (zacks.com).

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