Apple (AAPL 0.06%) stock has taken a beating this year, with its shares down by 19% as of this writing. It might be tempting to attribute that performance to marketwide troubles, and that's partly true. However, even as the Nasdaq Composite has recovered from being in bear market territory some weeks ago -- and is now slightly in the green for the year -- Apple has trailed far behind.
The most immediate problem for the tech leader is President Trump's trade agenda, but there are others, including the fact that it trails other giants in the exciting artificial intelligence (AI) market. Despite these issues, there are compelling reasons to buy the stock. Here are three.
Image source: Getty Images.
1. Apple is sitting on a pile of cash
Apple is no longer the growth stock it once was, but it continues to generate steady revenue, profits, and cash flow. In the second quarter of its fiscal year 2025, Apple's revenue increased by 5% year over year to $95.4 billion, with earnings per share coming in at $1.65, up almost 8% compared to the year-ago period. Meanwhile, the tech giant generated $98.5 billion in free cash flow over the trailing-12-month period. Though that represents a 5% year-over-year decline, you'd be hard-pressed to find a single company worldwide with more cash to spare than Apple. Here's how it compares in that department with some of its similarly sized peers.
AAPL Free Cash Flow data by YCharts
Investors will be familiar with the phrase "cash is king." One reason behind this sentiment is that having a boatload of cash allows companies the flexibility to invest in lucrative opportunities without having to sacrifice their obligations. One thing we know about Apple is that it has fostered a culture of innovation, and the cash it currently holds could be one of the keys to unlocking the next big thing for the tech leader.
It is working on various AI-related initiatives, including features it will add to its future smartphones. Apple may not make a breakthrough in the AI market immediately, but the company has a habit of improving existing technologies with great success. Having a substantial amount of cash on hand will enable the company to steer its AI strategy in whichever direction it chooses.
It will also help it mitigate tariff-related issues, perhaps by shifting production to some countries other than China -- Trump's favorite tariff target -- while also somewhat boosting its local manufacturing capacity.
2. A deep ecosystem to monetize
One of the most valuable parts of Apple's business is its existing installed base. The company has more than 2.35 billion devices in circulation and benefits from strong customer loyalty. Apple also has a services segment that offers various subscriptions, from news to video and music streaming, to fitness-related offerings, and fintech. The company boasts over a billion paid subscriptions already.
Some corporations have found some success in selling hardware devices at a loss -- or at least, at razor-thin margins -- to grow an installed base for monetization purposes. That could well be Apple's long-term strategy. Even if tariffs lead to increased prices for its devices, it could choose to absorb some of those costs to continue deepening its ecosystem. In the long run, the company's high-margin services segment will, eventually, make up a larger percentage of its revenue and significantly boost its profits.
3. Warren Buffett is staying put
In the first quarter, Warren Buffett's Berkshire Hathaway did not buy a single share of Apple, but the conglomerate did not sell any, either. True, Buffett has trimmed his position in the stock in the past few years, but that's not solely because of the company's troubles. At any rate, Apple remains the top holding in Berkshire Hathaway's portfolio, a sign that the Oracle of Omaha is still bullish on the stock for the long run.
Perhaps investors should not buy a company's shares just because someone else owns it, but it can at least be a factor in one's analysis. When combined with the other reasons to invest in Apple, the fact that the greatest investor of all time owns it makes a compelling case for the stock. That's before we add other factors, such as the company's excellent dividend program. Apple's stock might be down this year, and it could remain volatile in the short term.
But in my view, its long-term prospects remain attractive.
