Recently I stumbled across this juicy question: “What’s the bull case for Apple to outperform the other MAG7 stocks?” The poster was skeptical, and I totally get why. Apple’s sporting a P/E ratio of 38, revenue growth has slowed to a crawl (like, 2%—yikes), and they’re not exactly dropping groundbreaking products left and right. Compared to Microsoft, Google, Meta, and Amazon, the numbers don’t scream undervalued gem. So, why am I still hyped about Apple?
Grab a snack, because I’ve got thoughts, and I think there’s a solid case here that might just change your mind. I’ll share my perception about Apple and then you decide
The Ecosystem
Apple’s moat is deeper than we think
First off, let’s talk about the Apple ecosystem. I know, I know, it’s the most clichéd argument in investing circles. But hear me out, because this isn’t just about iPhones anymore. If you’re an Apple user (and I’m guessing a lot of you reading this are), you know how sticky this ecosystem is.
I got an iPhone, a MacBook, an Apple Watch, and AirPods—and I’m not switching to Android or Windows anytime soon. Why? Because everything just works together. My photos sync seamlessly, my texts pop up on my laptop, and I can unlock my Mac with my watch. It’s not sexy innovation, but it’s practical, everyday brilliance.
Now, scale that up to 2 billion active devices worldwide. That’s a massive locked-in user base.
- Microsoft has Windows and Office, sure, but it’s not holding you hostage the way Apple does.
- Google’s got Android, but it’s fragmented, Samsung and Xiaomi aren’t exactly singing kumbaya with Google’s vision.
- Meta’s got the social media game on lock, but they’re still figuring out the hardware play.
- And Amazon? Prime’s great, but it’s not a cohesive ecosystem like Apple’s.
This stickiness means Apple can keep selling services, think Apple Music, iCloud, Apple TV+, to the same loyal crowd, year after year.
Revenue growth might be slow now (@7.33% pa.), but this foundation is a cash-printing machine with room to run.
| AAPL (USD Bn) | 2020 | 2021 | 2022 | 2023 | 2024 | Growth (%) p.a. |
|---|---|---|---|---|---|---|
| Revenue | 274.52 | 365.82 | 394.33 | 383.29 | 391.04 | 7.33% |
AI: The Sleeping Giant About to Wake Up
Okay, let’s tackle the innovation gripe.
Apple hasn’t dropped a jaw-dropping product since the AirPods or maybe the Apple Watch. But here’s where I think the bulls have a leg to stand on. Apple’s quietly gearing up for an AI revolution.
While Microsoft’s cozying up with OpenAI and Google’s flexing its AI muscle with Gemini, Apple’s been playing coy. But don’t sleep on them. They’ve got something cooking with “Apple Intelligence” (yeah, they’re branding it already), and it’s coming to iOS, iPadOS, and macOS in 2025 (this year).
Consider this, Siri finally gets smart, really smart (like Amazon Alexa and Gemini). Your iPhone predicts your next move, edits your photos with pro-level precision, or even manages your schedule like a personal assistant who doesn’t flake.
Apple’s got the hardware advantage here, those A-series chips are beasts, and they’re already optimized for machine learning. If they nail AI integration across their ecosystem, it’s not just a product, it’s a game-changer for user experience.
Could this push revenue growth back into double digits? I’d bet on it.
Analysts are already whispering about a “supercycle” with the iPhone 17 or 18, driven by AI upgrades. Compare that to Meta’s metaverse gamble or Amazon’s sprawl, I think Apple’s got a clearer path to monetize this trend.
Cash Cow? More Like Cash King
Now, let’s talk money, because Apple’s financials are straight-up ridiculous. People refer the company as cash cow, and yeah, that’s fair.
But at a P/E of 38, you’re not just buying a cow, you’re buying the whole darn farm. Let’s break it down with some numbers.
| AAPL (USD Bn) | 2020 | 2021 | 2022 | 2023 | 2024 | Growth (%) p.a. |
|---|---|---|---|---|---|---|
| Cash & Cash Eq. | 38.02 | 34.94 | 23.65 | 29.97 | 29.94 | -4.66% |
| Total Debt | 117.28 | 130.52 | 122.50 | 117.95 | 109.09 | -1.44% |
| Shareholder’s Equity | 65.75 | 62.93 | 61.78 | 73.60 | 64.12 | -0.50% |
| – Retained Earnings | 14.97 | 5.56 | -3.07 | -0.21 | -19.15 | – |
| D/E | 1.78 | 2.07 | 1.98 | 1.60 | 1.70 | – |
| Free Cash Flow | – | 92.95 | 111.44 | 99.58 | 108.81 | – |
As of 2024, Apple’s got $29.94 billion in cash and cash equivalents. It’s almost flat compared to $29.97 billion in 2023. It’s actually down -4.68% (CAGR) since 2020, when they had $38.10 billion. Definitely not a growth story on the cash front. Meanwhile, their total debt has come down slightly, from $117.28 billion in 2020 to $109.09 billion in 2024.
What really gets me excited, though, is their free cash flow—it’s a monster. In 2024, Apple generated $108.81 billion in free cash flow, up slightly from $99.58 billion in 2023. Even better, they’ve grown it steadily from $92.95 billion back in 2020. That’s over $100 billion a year they can use to buy back stock, pay dividends, or just sit on for a rainy day.
Compare that to Microsoft, which is spending big on AI and cloud, or Meta, which is burning cash on VR dreams. Amazon’s reinvesting every penny into logistics and AWS, and Google’s got regulatory battles eating into their margins. Apple? They’re disciplined. They don’t chase every shiny trend—they wait, perfect, then dominate.
That free cash flow gives them flexibility to keep reducing shares, they’ve bought back about 30% of their stock over the past decade, pay a tidy dividend, and still have room for strategic acquisitions.
Imagine them snapping up a hot AI startup to turbocharge their ecosystem. It’s not flashy, but it’s smart, and it keeps the stock propped up even when growth lags.
[Note: Though I might sound gung-ho about Apple, but what’s extremely concerning is there negative retained earnings reported in 2023 and 2024. If I’ve to estimate the intrinsic value for Apply, this negative retained earnings will surely call for at least a 20% discount.]
The Valuation Debate: Is 38x Earnings Too Steep?
Alright, let’s get real about that P/E of 38.
It’s higher than Microsoft (around 32), Google (25), and Meta (23), and neck-and-neck with Amazon (39).
The 7.33% revenue CAGR in the last 5-years doesn’t justify that premium. But here’s where I push back. Apple’s not trading on today’s growth, it’s trading on future potential. That ecosystem and AI upside I mentioned? Investors are betting on it.
Plus, Apple’s margins are insane, think 46% gross margins. Though I must admit that Microsoft’s GM is 69% and Amazon’s is 48%.
Apple, Microsoft, and Amazon, all three cab squeeze more profit out of every dollar than anyone in the MAG7.
If you look at other metrics, like EBIT or free cash flow yield, Apple still holds its own.
Their debt’s low, their return on invested capital is top-tier, and they’ve got no messy regulatory overhang like Google or Meta.
Sure, Microsoft’s got the AI edge right now, but Apple’s got the brand and the runway to catch up. At 38x, you’re paying for quality, and in a shaky market, that matters. A 10-15% correction from the current price levels of $242, I think Apple’s in for a gamble.
The X-Factor of Apple
One last thing, because I can’t not mention it: Apple’s brand is unmatched.
People camp out for iPhones. They tattoo the logo on their arms (okay, maybe just the hardcore fans). Point is, Apple’s not just a company, it’s a lifestyle.
Microsoft’s cool, but it’s corporate. Google’s useful, but it’s not aspirational. Meta’s divisive, and Amazon’s convenient but not lovable.
Apple’s got that emotional hook, and it translates to pricing power. They can charge $1,200 for a phone and people still buy it. That’s a moat the others can only dream of.
Conclusion
So, Could Apple Outperform? Here’s the bottom line.
Apple’s got a shot at outshining Microsoft, Google, Meta, and Amazon, not because they’re growing gangbusters today, but because they’ve got the pieces in place to surprise us tomorrow.
The ecosystem keeps users hooked, AI could spark a growth resurgence, and their financial fortress gives them room to maneuver.
Will they hit double-digit revenue growth again? Maybe not next quarter, but I’d put money on it within two years. At a P/E of 38, it’s a bet on execution. but Apple’s track record says they deliver when it counts. Will I invest in Apple at a 38 PE? May be not, but after 10-15% correction (which will come eventually), its a hot pick (for long term investors who buy stocks for 5-10 years).
What do you think? Am I too bullish on the Cupertino crew, or do you see the same potential? Hit me up in the comments, I’m dying to hear your take.
Have a happy investing.
