Apple: a great business, priced for a good outcome
Apple sells the devices most affluent consumers already own, and earns a growing share of its profit from what they do on them. We rate the stock a Hold with a 12-month target of $285.
The business is better than the price. Services compounds at a double-digit rate and buybacks shrink the share count, but at 31 times forward earnings the market already pays for both.
Company overview
Apple designs consumer hardware, the software that runs it and the services around it. The iPhone is half of revenue, but Services supplies a growing share of gross profit because it earns roughly twice the margin of hardware.
More than two billion active devices form the installed base that buys apps, storage, payments and subscriptions year after year.
- Headquarters
- Cupertino, CA
- Founded
- 1976
- Employees
- ~166,000
- Market cap
- ~$3.9T
- Exchange
- NASDAQ: AAPL
Management overview
A stable, finance-literate team. The recent changes in the CEO, CFO and COO seats were planned handovers inside the company, so we see continuity in capital allocation and supply-chain strategy.
CEO since September 2026 after leading hardware engineering. Succeeded Tim Cook, who became executive chairman and built the services and capital return strategy.
CFO since 2025 after a decade in Apple finance. Continuity on buyback policy.
Leads the supply chain, including the shift of production toward India and Vietnam.
Owns iOS and the on-device AI roadmap, a key driver of the next upgrade cycle.
Other considerations
Investment thesis and considerations
Three arguments carry the rating. Two are reasons to own the stock; the third is the reason we stop at Hold.
1. Services keep compounding
A larger installed base and rising paid subscriptions grow Services faster than hardware, lifting company gross margin.
Services has grown at a double-digit rate for most of the past five years, and each new device adds to the base that buys apps, storage and subscriptions. Because Services carries roughly twice the gross margin of hardware, even modest mix shifts move company profit meaningfully. We model Services reaching about a third of revenue by FY30, which accounts for most of the margin expansion in our projections.
2. Capital return supports EPS
Buybacks shrink the share count by around 3% a year, adding to per-share growth even in flat hardware years.
Apple has retired more than a third of its shares over the past decade and still generates over $100B of free cash flow a year. Management has signaled no change to its net-cash-neutral target, so we expect repurchases to continue at a similar pace. That alone supports mid-single-digit EPS growth before any change in revenue, giving the stock a steady floor that most large-cap peers lack.
3. Valuation limits the upside
At 31× forward earnings the stock already prices in steady growth, so the team rates it a Hold, not a Buy.
The stock trades well above its ten-year average multiple, which assumes the next upgrade cycle and continued Services growth both arrive on schedule. Our blended target of $285 implies under 10% upside, short of the 12% hurdle the fund uses for a Buy rating. We would revisit the rating on a pullback toward $235, or if on-device AI features show a clear lift in iPhone upgrade rates.
Bull case
Bear case
Financial profile
USD billions except per-share data; fiscal years end in September.
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue | 365.8 | 394.3 | 383.3 | 391.0 | 416.2 |
| Gross margin | 41.8% | 43.3% | 44.1% | 46.2% | 46.9% |
| Operating income | 108.9 | 119.4 | 114.3 | 123.2 | 133.1 |
| Net income | 94.7 | 99.8 | 97.0 | 93.7 | 112.0 |
| Diluted EPS | $5.61 | $6.11 | $6.13 | $6.08 | $7.46 |
Financial projections
| Metric | FY26E | FY27E | FY28E | FY29E | FY30E |
|---|---|---|---|---|---|
| Revenue | 441.0 | 466.5 | 491.2 | 515.0 | 538.7 |
| Services share | 27% | 28% | 30% | 31% | 32% |
| Gross margin | 47.3% | 47.8% | 48.4% | 48.9% | 49.3% |
| Diluted EPS | $8.10 | $8.85 | $9.60 | $10.35 | $11.10 |
Key assumptions
- iPhone revenue grows 3% a year; Services grows 11–13%.
- Share count falls about 3% a year through buybacks.
- No change to App Store fees or search payments in the base case.
Valuation profile
| Method | Weight | Value / share |
|---|---|---|
| Discounted cash flow | 60% | $292 |
| Trading comps | 30% | $279 |
| Precedent multiples | 10% | $262 |
| Blended target | 100% | $285 |
The discounted cash flow carries 60% of the weight because Apple's cash flows are the most predictable of the three inputs. Comps and precedent multiples cross-check it and pull the blend to $285.
File repository
SEC filings
8 filesModels
6 filesResearch reports
6 filesEducational research produced by graduate students. Not investment advice. Figures are illustrative samples.