Apple Inc. (AAPL): A Bull Case Theory

We came across a bullish thesis on Apple Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on AAPL. Apple Inc.’s share was trading at $220.03 as of August 7th. AAPL’s trailing and forward P/E were 33.39 and 27.78, respectively according to Yahoo Finance..

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Apple delivered a strong Q3 FY25, reporting revenue of $94.0 billion, up 9.6% YoY and ahead of estimates, with EPS of $1.57 rising 12% YoY and beating forecasts by nearly 10%. Services set a new high at $27.4 billion (+13.3% YoY, 75.6% gross margin), driven by robust growth across iCloud, Apple Music, and the App Store, supported by a growing base of over 1 billion paid subscriptions. iPhone revenue grew 13.5% YoY to $44.6 billion, propelled by strong demand for the iPhone 16 lineup, with record upgraders and an expanding installed base.

Mac revenue rose 14.8% YoY to $8.0 billion on the back of M4 MacBook Air adoption and creative professionals embracing Apple Silicon. While iPad and Wearables saw revenue declines due to tough comps and muted accessory demand, the installed base for all hardware categories hit new records, with over half of new iPad, Mac, and Watch buyers being first-time users. Apple TV+ also saw double-digit viewership growth and 81 Emmy nominations.

Regionally, revenue rose across all geographies, with standout growth in Asia Pacific (+20.1% YoY) and Japan (+13.4%), while Greater China grew 4.4% aided by targeted promotions. Tariff-related costs ($800M in Q3, $1.1B expected in Q4) pressured free cash flow, which fell to 26%, prompting accelerated supply chain shifts to India and Vietnam.

Nonetheless, operating margin expanded to 30%, and share count declined by over 2.5%, enhancing per-share results. With guidance for mid-to-high single-digit revenue growth and sustained Services momentum, Apple continues to scale profitably while investing heavily in AI and U.S. infrastructure.

Previously, we covered a bullish thesis on Apple Inc. by Kontra in October 2024, which highlighted the company’s sticky ecosystem, iPhone-led revenue, growing services, and strong capital returns. The company’s stock price has depreciated approximately 6.37% since our coverage. This is because the thesis hasn’t fully played out yet. Sergey shares a similar view but emphasizes on Q3 FY25 execution and AI investment momentum.

Apple Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 159 hedge fund portfolios held AAPL at the end of the first quarter which was 166 in the previous quarter. While we acknowledge the risk and potential of AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AAPL and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.