Apple Inc. (NASDAQ:AAPL) has seen its gross profit margin reach a new record during its first fiscal quarter, thanks to the continued growth of its service business which helped counter the decline in iPhone sales.
Dan Niles’ view of the technology titan hasn’t changed despite his efforts.
Niles sees Apple as “a low growth stock with high multiples” but believes that other names in the megacap space, such as Meta Platforms or Microsoft are better choices for 2025.
Apple’s stock has risen by nearly 10% since its low for the year.
Why is Apple experiencing a slow growth in its top line?
Niles has a dovish outlook on Apple’s shares, as the stock is currently trading at an enormous premium to other markets despite the fact that the company only grew its revenue by 5.0% over the past three years.
The iPhone maker also loses market share in China, which indicates that it is struggling to stay competitive.
The AI roll-out was slow and people weren’t that interested in what the company offered. In an interview with CNBC today, he said that this is why the top line has been growing slowly.
Apple Stock, on the other hand, is still more appealing for investors looking to earn income, as its dividend yield at this writing was 0.41%.
Can DeepSeek benefit Apple’s stock price?
Nile said that DeepSeek’s new AI model, which is claimed to be more powerful than LLMs of US megacaps and costs much less to develop and operate but has a higher level of performance could benefit Apple Intelligence.
According to Niles Investment Management founder Niles, Apple’s upgrade cycle benefit could not materialize until the next year.
Apple Inc. may also not feel the effects of the Nasdaq listed firm, which “didn’t spend too much” on the project.
It’s also important to point out that AAPL shareholders have enjoyed a great deal of happiness since the beginning of 2020. The stock price for this company has quadrupled in that time.
What AAPL is expecting for the fiscal Q2
Apple’s services will probably grow by low double-digits in the current quarter. However, the growth on an annualized base may be in the middle single digits.
A strong dollar is expected to have a negative impact on sales of 2.5% in the second quarter.
Wall Street analysts do not share Niles’ pessimism. Apple’s stock is currently rated “overweight” by Wall Street analysts.
The company reported that its iPhone sales were $69.14 billion for the first fiscal quarter, which is significantly lower than the $71.03 million analysts had predicted.
Analysts are likely to be more focused on AAPL’s $26.34 Billion in services revenue, which easily surpassed Street expectations of $26.09 Billion and contributed to its record gross margin of 46.9% for Q1.
As new information becomes available, this post Apple labeled as a “low-growth stock” despite record Q1 profits–here is why could be updated.
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