Apple (AAPL +0.86%) has had plenty of doubters in recent years. They point to the company having to deal with steeper tariffs on imported goods, regulatory scrutiny in various regions, and unimpressive sales and earnings growth. However, the tech leader continues to perform well. Its shares are up by 51% over the past 12 months, while the S&P 500 has gained 25% in the same period. The best part is that it’s not too late to invest in Apple. Let’s consider three reasons why the stock still looks like a great pick for long-term investors.
Image source: The Motley Fool.
1. Doubling down on AI
Apple is increasingly incorporating artificial intelligence (AI) into its products. The company made important announcements along those lines during its latest Worldwide Developers Conference. One of the most important new features it announced was Siri AI. The virtual assistant has been rendered far more powerful thanks to AI. Between its more personalized flair, ability to help users find what they need more quickly, and an app that stores conversations and allows people to revisit them later (among other features), Siri AI may end up being a hit among Apple’s loyal customers.
This could help sustain demand for the company’s products and deepen its all-important ecosystem that powers its high-margin services segment. There is another important point about Apple’s recent AI-related work. While many thought the company was trailing its similarly sized tech leaders in capitalizing on AI, it was taking a slow-and-steady approach, as it has historically done. Apple doesn’t rush. The company has a habit of keeping things close to the vest, making innovative twists on existing technologies, and finding tremendous success in the process. AI is just the latest example.
It is already arguably impacting the company’s financial results. The company’s latest iPhone, the 17, has been a hit, partly thanks to Apple Intelligence. Siri AI and other new features the company will introduce in the future may help the company keep the party going.
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2. A new product shape on the horizon?
Apple will announce its new iPhone lineup later this year. Rumor has it that, in addition to its usual base, Pro and Pro Max models, the company will reveal a new foldable version of its popular device. The iPhone Fold, if real, will be a direct competitor to similar devices launched by some of its peers in the smartphone market. These have been hugely successful, so Apple may be hoping to gain market share with the iPhone Fold. The best-case scenario is that this new device will be every bit as innovative as rumors suggest, further boost sales growth, and attract a significant number of new users to the company’s ecosystem. If Apple can pull that off, it will strengthen its medium-term outlook.
3. Returning capital to shareholders
Investors shouldn’t overlook Apple’s dividend program. True, the company doesn’t have an impressive forward yield. It currently sits at 0.4%. However, Apple makes up for it by constantly raising its payouts. It has done so by 89.5% over the past decade. Apple also generates significant free cash flow — to the tune of $129.17 billion over the trailing-12-month period — and has plenty of money to return to shareholders while still investing plenty in R&D to stay ahead of its competitors. That makes Apple a solid dividend growth stock. And the company is handsomely rewarding investors in another way. Management recently approved up to an additional $100 billion in share buybacks. That’s great news for investors.
Buy and forget
Apple has not completely escaped the challenges it has faced recently. It is still the subject of an antitrust lawsuit in the U.S., while tariffs continue to impact the company’s financial results. Apple’s ability to perform well amid all that speaks volumes about the company’s business. And in the long run, the tech leader could still deliver market-beating returns. Its innovative qualities will help attract new customers and expand its installed base of more than two billion devices, while subscriptions within its services segment should maintain healthy growth and help improve its profits and margins. Apple also benefits from a wide moat thanks to the network effects of its app store (developers attract customers, and vice versa), as well as the high switching costs of its devices. In short, the company remains an excellent pick for long-term investors.
