2 Reasons to Buy Apple Stock and 1 Significant Risk

Key Points

• Citigroup believes Apple stock is starting to look attractive.
• The company continues to push into healthcare, which could be where its artificial intelligence initiatives pay off.
• Regulatory issues hang over the company’s “walled garden,” which could hurt topline revenue.

Like many technology stocks, Apple Inc. NASDAQ: AAPL is off to a rough start in 2025. AAPL stock is down 11.8% on concerns over slowing iPhone sales, particularly in China, and confusion bordering on concern over the company’s plans to integrate artificial intelligence (AI) into its walled garden ecosystem.

In March, the company announced a shuffle in its executive ranks after it announced it would be delaying the highly anticipated personalized AI-driven features in Siri, its voice assistant for the iPhone. What’s being termed Siri-gate is adding fuel to broader concerns that there may be a pause in the AI revolution.

But Apple continues to have one of the deepest ecosystems on the planet. History has shown that once individuals get into that ecosystem, they tend to stay. 

That's all well and good, but investors want to know if the stock is a buy. Institutions are buying, and there are technical signals that say yes. Apple won’t report earnings until early May. Until then, here are two reasons why AAPL stock may be worth an investment and one reason why investors may want to remain on the sidelines.

Citigroup Says Apple Is Looking More Attractive

Citigroup Inc. NYSE: C has been bullish on AAPL stock for some time. In January, Citi raised its price target on Apple from $225 to $275. And on Apr. 1, the company reiterated the price target and its Buy rating for the stock.

At $275, Citi is putting a multiple of 30x on Apple stock. That’s nearly identical to the forward P/E ratio of Apple as of Apr. 1. However, it’s nearly 20% lower than its trailing twelve-month (TTM) P/E ratio.

But getting to $275 won’t come without some pain. In Citi’s bear case, they believe Apple stock could drift as low as $200 before the rebound happens. That would be a drop of over 10% from the stock’s price in mid-day trading on Apr. 1.

Apple Continues to Push Into Healthcare

One benefit of being in the Apple ecosystem is the way features like those in the Health app translate from user to user. While the company may be behind in AI, Apple believes healthcare may be where it will make up the ground.

For example, according to many industry insiders, Apple is working on overhauling its health app. The initiative, code-named Project Mulberry, will revamp the existing Health app and provide a health coach, which a new AI agent will power so it would serve as a doctor in a limited fashion.

Such a move could radically impact the company’s current Apple Watch. When the Apple Watch was introduced in 2015, critics dismissed it as a gimmick and a sign that the company’s innovative days were behind it.

But what would those investors think if the Apple Watch became a medical device covered by insurance because of its potential diagnostic tools? With an updated Health app, the company could use its wearables to monitor users’ health, which could alert them to any issues or help them with their general health.

The company is also reportedly still working on one of its moonshot initiatives, a noninvasive glucose monitor that originated when Steve Jobs was still alive. The idea is to add a sensor to the Apple Watch that can inform users if they are prediabetic, which could help them address their health before getting diabetes. The idea is years away from being a reality, but it has hit certain key milestones.

The Risk: Services Business Begins to Weaken

For the last five years, long-term Apple shareholders have taken comfort in the idea that Apple’s revenue base involves more than its legendary iPhone. They point to Apple’s Services business. This includes all the subscriptions that many Apple users sign up for, which generate billions in revenue for the company.

It’s what creates Apple’s walled garden, a place where, according to the company, “...hardware, software, and services intersect...” In fact, it’s a feature that allows Apple users to feel more secure in the ecosystem.

Since January 2024, Apple has been under regulatory pressure from the U.S. Department of Justice (DOJ) over allegations that it engages in monopolistic behavior in the smartphone market.

Apple is attempting to thread the needle by making some adjustments to its App Store guidelines to allow more flexibility, including allowing some third-party app stores. This is likely a wise approach to help the company avoid harsher legal actions. However, some investors are concerned that the company’s Services revenue will take a hit.