Needham & Company analysts provided three key reasons why investors should remain bullish on Apple (NASDAQ:AAPL) stock despite concerns about its dependence on the iPhone.
The firm maintained a Buy rating on the stock in a note Tuesday, with a target price of $260 per share, representing a 16% upside.
A Liquid Stock During Uncertainty: The analysts note that while competitors like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) are heavily investing in generative AI (GenAI) infrastructure with no immediate revenue boost, Apple stands out as a stable and liquid stock.
In a volatile market, they argue that investors need a reliable stock to "hide in" during 2025, making Apple an attractive option.
Share Repurchases Driving EPS Growth: Needham says Apple is actively reducing its equity base through share buybacks, which is expected to drive earnings per share (EPS) growth.
The company's $110 billion share repurchase authorization from May 2024 is projected to lead to 11% EPS growth in fiscal year 2025 and 12% in 2026, according to Needham estimates. This continued buyback strategy is expected to support the bullish outlook for Apple.
Strong Cash Position Enables Further Buybacks: Needham believes Apple's commitment to achieving "net cash zero" from its current net cash position of about $50 billion, along with $91 billion in cash from operations reported in the first nine months of fiscal year 2024, suggests accelerated share repurchases in the near future.
This financial strategy is expected to further enhance shareholder returns.
Despite concerns about Apple's reliance on the iPhone and its slower pace of GenAI adoption compared to peers, Needham & Company believes Apple's financial discipline and stock buyback strategy make it a strong investment opportunity.
