Apple Stock Is Soaring on iPhone Sales. Is It Time to Reconsider This Warren Buffett Stock?

Apple (NASDAQ: AAPL) stock has been trailing the market this year, knocked off its perch as the most highly valued stock in the world by both Nvidia and perennial rival Microsoft. But it's never been a great idea to bet against this Warren Buffett favorite, which has several features that make it a powerhouse tech stock.

The stock is already roaring back to life, hitting new highs recently on the news of strong iPhone sales. Is it time to add it to your portfolio?

Image source: Getty Images.

Win for the iPhone

iPhone sales are an important, perhaps the most important, indication of what's happening at Apple. That's because they account for about half of Apple's total sales. The iPhone is Apple's premier product, the linchpin in its ecosystem of connecting products.

Apple stock tends to rise and fall along with iPhone sales growth, or even market sentiment about where iPhone sales are headed. Since Apple is currently the third-most-valuable company in the world, and this is its signature product, consumer behavior trends will impact Apple stock.

Recently, there's been momentum. That started with an excellent update in the company's fiscal third quarter (ended June 28), when iPhone sales increased 13% year over year.

Recently, market research firm Counterpoint said that sales of the iPhone 17, Apple's latest release, outpaced iPhone 16 sales by 14% over the first 10-day period it was for sale in the U.S. and in China. These are the tech company's largest markets. The base model is popular in China, while the premium model is doing well in the U.S.

The new iPhone Air, which is the thinnest smartphone on the market but has fewer capabilities, has been less thrilling. But the device is an important reminder that Apple has the most cutting-edge technology in the space, a thumbs-up for its ability to keep its dominant position in the space.

Apple's edge at its best

iPhone users tend to be loyal to Apple, and they'll often buy a range of interconnected Apple products like Macs, iPads, and AirPods. One of the features users love about Apple is its quality, which means they don't necessarily need to upgrade every time there's a new launch. The market keeps tabs on when iPhone users find it valuable to upgrade to a new device.

The Apple ecosystem is a major edge for the company over other hardware companies. It also increasingly relies on software for sales growth, and subscriptions in particular, which is a higher-margin business. This is the kind of business with a competitive edge that Buffett loves, especially when it's consumer focused. While subscription services are a recurring revenue stream, which means Apple can rely on those monthly, high-margin payments coming in, keeping satisfied customers in the ecosystem is another way to generate reliable revenue.

Buy Apple stock today?

Apple stock has already fallen a bit, and investors will get more information when Apple reports fiscal fourth-quarter and full-year earnings.

The market hasn't been fully satisfied with Apple's progress in artificial intelligence (AI) and seems to be worried about whether Apple is keeping up with its competitors. However, higher iPhone sales demonstrate that at the consumer level, users are just fine with the state of Apple Intelligence right now. More than that, they love Apple products, and as Apple keeps releasing new upgrades and technology, they will continue to buy more of them.

That's the basis of Apple's incredible system, and the company should remain a leader in technology well into the future.

Apple isn't likely to be a high-growth stock at this stage of the game, but it should be reliable for gains and value, as well as a growing dividend. I wouldn't bet against Apple right now, and trading at 29 times forward one-year earnings, it's reasonably valued.

Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.