Does Apple Stock Still Have Room to Run?
Apple (AAPL) stock is at an interesting point right now. It has strong momentum, and if you bet on it, you are betting on a company with strong margin, good cash flow, low-debt capital structure, and good tailwinds. But is that enough?
Why Bet On AAPL Now?
The primary driver for equity appreciation is the ongoing mix shift towards the high-margin services business. By monetizing its growing installed base of over 2.5 billion active devices, Apple is transforming its earnings profile from one dependent on cyclical hardware sales to a more predictable, high-quality, recurring revenue stream, which justifies a premium valuation.
- Services revenue reached an all-time high of exactly $30.98 billion (up 16% year-over-year) in Q2 2026.
- The installed base of active devices now exceeds 2.5 billion, providing a large and growing base for monetization.
- Driven by a high-value software mix shift, Services’ gross margin expanded sequentially to 76.7%, lifting total corporate blended gross margin to a March-quarter record of 49.3%.
- The company is successfully increasing prices on services, demonstrating pricing power within the ecosystem.
Before making any decision, it helps to understand if the above factors align with what has been driving AAPL stock so far, or has the market view changed?
How Do The Fundamentals Look?
- Long-Term Profitability: About 29.1% operating cash flow margin and 31.8% operating margin (last 3-year average).
- Strong Momentum: Currently in the top 10th percentile of stocks in terms of “trend strength” – our proprietary momentum metric.
- Revenue Growth: Apple saw revenue growth of 12.8% LTM and 5.6% last 3-year average, but this is not a growth story
Below is a quick comparison of AAPL fundamentals with S&P medians.
| AAPL | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Technology Hardware, Storage & Peripherals | – |
| PS Ratio | 10.2 | 3.2 |
| PE Ratio | 37.7 | 23.6 |
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| LTM* Revenue Growth | 12.8% | 7.4% |
| 3Y Average Annual Revenue Growth | 5.6% | 5.7% |
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| LTM* Operating Margin | 32.6% | 18.4% |
| 3Y Average Operating Margin | 31.8% | 18.3% |
| LTM* Op Cash Flow Margin | 31.1% | 21.1% |
| 3Y Average Op Cash Flow Margin | 29.1% | 20.0% |
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| DE Ratio | 1.8% | 22.1% |
*LTM: Last Twelve Months
The Bear View & The Current Investment Debate
The current investment debate on AAPL is centered around the following: The core disagreement: whether the high-margin services growth engine is durable enough to overcome global regulators actively trying to dismantle its primary monetization method, the App Store.
The prevailing sentiment is neutral. The powerful momentum from the iPhone 17 cycle (+23% growth) and high-margin services is being fully offset by the structural threat from regulators and near-term supply chain headwinds. Sentiment is neutralized by this stalemate.
| Bull View | Bear View |
|---|---|
| Bulls are betting on continued monetization of the 2.5B+ device installed base, driving services growth >14% and company gross margins >48%, justifying a premium valuation for quality. | Bears are focused on the DOJ lawsuit and the EU’s DMA forcing changes to the App Store’s commission model, risking the primary profit driver and causing a significant P/E derating. |
Understanding a bear view is one thing, but holding an investment through volatile market phases is another. It certainly makes you more resilient if you internalize how the stock has fallen during past market crashes. Staying invested matters.
AAPL Is Just One of Several Such Stocks
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These stocks have high operating (cash flow from operations) margins, low-debt capital structure, and strong momentum
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:
- Average 12-month forward returns of nearly 15%
- 12-month win rate (percentage of picks returning positive) of about 60%
Staying Invested Over Chasing Momentum
Chasing momentum in a single stock like AAPL is a high-stakes game. When a high-flyer hits a sudden 20% rough patch, the volatility often forces investors to panic and exit early, missing the long-term gains they were after. So how do you stay invested? Simple. Through the “Portfolio” approach.
The Trefis High Quality Portfolio (HQ) is designed to keep you in the game. By spreading your exposure across 30 quality stocks, it neutralizes the “all-or-nothing” risk of a single stock. It dampens the sharp, stomach-churning drops while maintaining upside exposure.