Apple Inc (NASDAQ: AAPL) saw its gross margin hit a record in its fiscal first quarter on the back of continued momentum in its services business that helped offset the weakness in iPhone sales.
But that wasn’t enough for Dan Niles to change his view on the tech titan.
Niles continues to see Apple as a “low growth stock with a high multiple” and sees a few of the other mega-cap names like Meta Platforms and Microsoft as better picks for 2025.
Apple stock is currently up nearly 10% versus its year-to-date low.
What’s behind Apple’s slow top-line growth?
Niles is dovish on Apple shares as they’re currently trading at a massive premium to the broader market even though the company has grown revenue by only 5.0% in three years.
Plus, the iPhone maker is losing market share in China which suggests it’s struggling to remain competitive.
“The AI rollout has been slow, and what they’re offering, people aren’t all that excited about. That’s why we’ve got this slow-growing top-line,” he told CNBC in an interview today.
Apple stock, however, remains somewhat more attractive for income investors as it pays a dividend yield of 0.41% at writing.
Could DeepSeek be a benefit for Apple stock?
Nile agreed that DeepSeek’s new AI model which is allegedly more powerful than the US mega-cap’s LLMs but costs significantly less to build and operate could help Apple Intelligence.
But the related benefit in terms of an upgrade cycle could take until next year to materialize for Apple, according to the founder of Niles Investment Management.
Additionally, the Nasdaq-listed firm “wasn’t spending too much on it anyways,” which is why the impact may not be meaningful for Apple Inc., he added.
That said, it’s important to note that AAPL investors, nonetheless, have been a happy lot since early 2020, given the company’s stock price has roughly quadrupled during that period.
What AAPL expects for its fiscal Q2
In the current quarter, Apple said its services business will likely grow in the low double digits but the overall growth may remain in the mid-single digits on an annualized basis.
The tech behemoth expects a strong dollar to be a 2.5% headwind for sales in Q2.
Note that Niles’s pessimism is not broadly shared by Wall Street analysts. The consensus rating on Apple stock currently sits at “overweight”.
That’s when the company’s iPhone sales printed at $69.14 billion in its fiscal first quarter – significantly weaker than the $71.03 billion that experts had forecast.
Analysts may be focusing more on AAPL’s services revenue of $26.34 billion which handily topped Street estimates of $26.09 billion and helped its gross margin come in at a record 46.9% in Q1.
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