Apple (AAPL 4.26%) shares have rallied sharply from lows earlier this year. Shares traded below $180 during the tariff scare in April, and the stock largely stayed below $210 through August. Recently, however, shares pushed to record territory above $260 as investors digested impressive fiscal third-quarter results and the well-received launch of the iPhone 17 line-up.
Ultimately, the Cupertino-based iPhone maker is benefiting from a healthier core business and a product cycle that finally looks like a tailwind again. For investors wondering whether to trim after the run-up, doing so could be a mistake.
iPhone 17 Pro Max. Image source: Apple.
Here are five reasons I'm bullish on Apple stock -- even after its recent run-up.
1. Recent results are moving in the right direction
Revenue in the quarter ended Jun. 28 (fiscal Q3) increased 10% year over year to about $94.0 billion. That compares with just 5% growth in the March quarter.
Even more, Apple's momentum in fiscal Q3 was in the areas investors watch closely. The period's iPhone sales rose about 13% to about $44.6 billion. Additionally, services revenue increased about 13% to a record $27.4 billion.
Apple also said every geographic segment grew in the June quarter. That was not the case earlier in the fiscal year.
2. Improving profitability
Earnings per share rose even faster than revenue during the quarter. The key per-share profitability metric rose 12% year over year to $1.57. Share count reduction helped, but the bigger driver was higher gross profit dollars from iPhone and services.
Total gross margin reached 46.5%, up slightly from a year ago. This was despite product margin facing tariff costs that pressured profitability. Meanwhile, Apple's services gross margin remained far higher than both Apple's product gross margin and its overall gross margin. This is important because Apple's services business generally grows faster than its products business, so the high-margin segment will likely have a growing impact on the company's overall profitability.
3. A cash cow
Apple closed the quarter with about $133 billion in cash and marketable securities and roughly $92 billion of term debt. That balance sheet, combined with the company's robust free cash flow (trailing-12-months free cash flow was $96.2 billion) gives the company flexibility to keep funding both investment and capital returns.
Indeed, the board authorized a new $100 billion share repurchase program in May and lifted the quarterly dividend 4% to $0.26. In addition, the company has committed to investing $600 billion in jobs, manufacturing, supplier partnerships, and other expenditures in the U.S. -- investments that will likely help fuel Apple's future growth.
4. iPhone 17 strength
Recent research from research firm Counterpoint suggests that iPhone 17 demand is significantly ahead of last year's cycle in the U.S. and China. If this turns out to be true, Apple could maintain its recent return to double-digit growth in iPhone sales in the coming quarters.
Apple's new iPhone lineup has been well-received, making many analysts more optimistic about the stock. Not only is the entry-level iPhone 17 packed with value, but there are differentiating factors for the flagship iPhone 17 Pro lineup, too, including significant camera upgrades and a bold new orange color. And then there's an entirely new iPhone priced between these two: the iPhone Air. It sports an overhauled form factor that focuses on durability and thinness.
NASDAQ: AAPL
Key Data Points
5. An attractive valuation
While shares aren't cheap, they're not expensive either. The stock trades at 32 times forward earnings. And combining both the quality of Apple's business with the fact that it is inflecting in recent quarters, it makes sense to pay up for a reasonable valuation.
A strong iPhone sales cycle and margin expansion as its high-margin services segment grows as a percent of overall revenue should help Apple live up to this multiple.
Of course, there are some key risks. Tariffs weighed on product margin in the June quarter, and management estimated about $1.1 billion of tariff costs in the current quarter. Additionally, while Apple's revenue in Greater China started recovering in fiscal Q3, it could weaken again. Given how dependent Apple is on the segment, investors need to watch iPhone sales in the market closely.
Overall, the stock looks good -- even at its higher valuation. Revenue growth accelerated from fiscal Q2 to fiscal Q3, and a strong iPhone 17 could help the company's revenue growth accelerate even more. In addition, Apple's fast-growing services segment is a key tailwind that should persist for years to come.
