As the Apple share price hits fresh highs after earnings, should I buy the stock?

When the market opened last Friday (31 October), the Apple (NASDAQ:AAPL) share price hit fresh 52-week highs. The main driver in the short term was the release of quarterly results. Despite being a multi-trillion-dollar company, Apple has lost some swagger recently, as some feel it’s falling behind in the AI race. Here’s my take.

Results snapshot

Apple reported revenue of $102.5bn for its most recent quarter, an 8% year-over-year increase and slightly above expectations. The growth was driven by strong demand for new iPhone models and the Services division. This was evident as both divisions hit record levels in the quarter.

However, growth was uneven. Sales in China didnât meet expectations, which is an area that has been underwhelming for several quarters. Looking ahead, Apple is targeting between 10% and 12 % revenue growth for the upcoming quarter. This is meant to be a good period, given it has the holiday season.

Concern still about AI

The results didn’t significantly alter my view that Apple is struggling to keep pace with its peers in terms of AI. CEO Tim Cook said they still plan to release an updated version of Siri next year, which will feature improved AI capabilities. Yet, I see this as being a missed opportunity, as it has already been so delayed. There are still plans to integrateÂ OpenAIâsÂ ChatGPT into Apple Intelligence, but again it’s not progressing at the pace of other companies.

Apple stock is up 21% over the past year. In comparison, Microsoft is up 26% over the same period, with Alphabet up 63%. Even the Nasdaq composite index is up 30%! I think we’re already starting to see signs of the stock performance not keeping up with peers that are moving ahead with AI innovation.

The brighter side

Of course, a 21% gain in a year isn’t a bad performance for the US stock. There are also positive signs to note. For example, iPhone demand remains really strong. As a flagship product, this has the potential to continue to do the heavy lifting for the company. If Apple can deliver new form factors (like foldable iPhones or glass designs), it could spur even more growth in the coming years.

The Services division is also doing very well. This is good as it’s a high-profit-margin area. It’s also less cyclical than hardware, as people often continue to pay their subscriptions even when times are tough.

When I put everything together, I don’t feel it’s the right time for me to buy Apple stock. I do believe in the AI story, and that tech stocks can keep rallying. But I don’t think Apple is the winner right now. Rather, I’ll look to its competitors who are showing more promising development signs right now. Until Apple can demonstrate that it’s making significant positive moves in product innovation, I’ll give it a pass.

The post As the Apple share price hits fresh highs after earnings, should I buy the stock? appeared first on The Motley Fool UK.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Apple, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.