Last June, I made a bull case for Apple (AAPL 1.93%) stock, calling it a "sleeping giant." Since then, the stock has risen about 27% -- and that includes the stock's sharp drawdown in the first week of 2026. With such a strong gain since that article, has my bull case changed?
Not at all. If anything, it has strengthened.
Since this call in June, Apple's top-line growth has improved significantly, and the company guided for even stronger growth in the holiday quarter, fueled by a robust new iPhone lineup.
Of course, my bull case isn't just about the iPhone. I think the company will have more than one catalyst working in its favor over the next few years. Here's a close look at the stock today, and why I think its drawdown in the first week of 2026 is a great buying opportunity.
Apple store. Image source: Apple.
Apple's strong growth has been masked
With largely muted sales growth since the end of Apple's fiscal 2022, some investors have likely forgotten how much a successful product cycle can move the needle for the tech giant. Additionally, some extremely tough comparisons in fiscal 2021 and fiscal 2022 have arguably obscured the company's strong growth profile on a broader scale. The company's five-year compounded revenue and earnings-per-share growth, for instance, is quite impressive.
Going back to fiscal 2021, Apple's revenue soared more than 33% year over year. And then in fiscal 2022, the tech giant grew 8% on top of that growth. This meant that in just two years, Apple's revenue rose a total of 44%. And even when you include the two fiscal years of muted sales growth that followed, as well as fiscal 2025 return to moderate growth, sales compounded at an average rate of about 9% annually during this period. And earnings grew even faster.
And, underneath the hood, we've seen Apple's lucrative services business consistently grow at double-digit rates year over year. With the segment commanding a gross margin about twice as high as its products business, this (along with an aggressive share repurchase program) has helped the tech company's earnings per share grow at an even faster rate than revenue. Even more, with Apple's services business growing as a percentage of total revenue, it will likely help the company accelerate its overall earnings growth profile in the coming years.
Several catalysts
With Apple now facing easier comparisons, rather than the extraordinarily difficult ones it has been up against since sales grew a total of 44% between the end of fiscal 2020 and fiscal 2022, sales growth for Apple should come more easily going forward.
Further, Apple has seen its top-line growth rates pick up speed in recent quarters, and management expects its holiday quarter to be particularly strong. In fact, management guided for revenue to grow at a rate of 10% to 12% year over year in the first quarter of fiscal 2026 (the quarter that coincides with the fourth calendar quarter of 2025). Even more, the company said its iPhone, which represents over half of Apple's sales, should also post double-digit year-over-year revenue growth during the quarter. Given that this is the first full quarter of sales for Apple's latest iPhone lineup, management's iPhone sales growth guidance is a good indication of how the fiscal year will likely unfold.
And services should be a catalyst for revenue growth as well; total fiscal 2025 services revenue grew 14% year over year, and management stated that it expects a similar growth from services in the first quarter of fiscal 2026.
Finally, there's AI (artificial intelligence). Sure, Apple Intelligence (Apple's AI features across its operating systems) arguably hasn't yet created a game-changing value proposition for customers. But Apple CEO Tim Cook did say in the company's most recent earnings call that he believes it has been one of the factors influencing iPhone 17 purchase decisions. Even more, he said, "we're very bullish on it becoming a greater factor."
NASDAQ: AAPL
Key Data Points
Zooming out even more, given the power of Apple's brand and the loyalty of its customers, Apple has historically been able to, from time to time, introduce major new features like Siri, product categories like Apple Watch or AirPods, or dramatic new designs to its existing products that spark significant accelerations in its sales trends. It is possible that AI could similarly unlock not only major new features but possibly even entirely new product categories.
Why Apple stock is a "sleeping giant"
When you combine the potential for AI to accelerate Apple's business with the company's history of launching new products, features, or services that have significantly moved the needle for the business, this explains why I think Apple is a "sleeping giant." The company is always one major new product feature or service away from a huge acceleration.
Of course, there's no guarantee that Apple gets this anticipated acceleration. The company faces risks, including intensifying competition and geopolitical risks. And, of course, there's valuation risk. With a valuation of about 35 times earnings, investors are already pricing in accelerated business momentum. Failing to deliver, therefore, could lead to underperformance. Further, there's always a chance that any new products, features, or design overhauls flop instead of succeeding. Overall, though, I think Apple stock is worth holding as the company works to find its next big accelerant for its business -- one that could possibly even exceed investors' expectations.
