Apple Just Made a Controversial Move. Is the Stock One to Avoid or Is Now the Time to Buy?

Apple (AAPL +4.88%) has been a stock market darling over time. This is thanks to the company's long track record of earnings growth, driven by its solid customer base. The company makes some of the hottest devices around, from the top-selling iPhone to the Mac and iPad. Investors appreciate this strength and have piled into the stock, sending it to a gain of more than 1,100% over the past decade.

But, just recently, Apple made a shocking and controversial move. The stock fell 6% on the news, for its worst performance in more than a year. After such an event, is Apple stock one to avoid? Or is now the time to buy shares of the tech giant? Let's find out.

Image source: Getty Images.

The Apple success story

First, though, let's catch up on the Apple success story. As mentioned, the tech company makes a variety of devices that have become household names. In fact, even though Apple initially launched the iPhone back in 2007, it hasn't lost its luster. The iPhone 17 was the top-selling smartphone worldwide in the first quarter of this year, and four of the top 10 were iPhones, according to Counterpoint Research.

This product, along with Apple's other devices, has helped the company grow revenue and profit over the past several years. Meanwhile, return on invested capital has also been on the rise, showing that the company has benefited from its spending decisions.

AAPL Revenue (Annual) data by YCharts

In recent times, a new and significant revenue stream has also emerged, and this is services revenue. Over time, Apple has built a massive customer base, now with 2.5 billion active devices. And today, these devices equal recurrent revenue as users sign up for services, from data storage to digital entertainment. Quarter after quarter, services revenue has been reaching new records.

Apple's latest move

Now, let's consider Apple's latest move, which is quite controversial. The company, facing rising memory and storage prices, has decided to pass some of this on to its customers in the form of higher prices. Apple said artificial intelligence (AI) data centers have created soaring component demand, and that's put upward pressure on prices.

Apple's moves are as follows:

• MacBook Neo will increase to $699 from $599
• MacBook Air 512GB will increase to $1299 from $1099
• MacBook Pro 1T will increase to $1999 from $1699
• iPad Air 128GB will increase to $749 from $599
• iPad Pro Wi-Fi 256GB will increase to $1199 from $999

As mentioned, Apple stock sank following the announcement, with the concern being that customers now may think twice before rushing to Apple for a new device. But it's important to remember that one of Apple's key strengths is its moat, or competitive advantage -- and that's the power of its brand.

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NASDAQ: AAPL

Apple

Today's Change

(4.88%) $14.36

Current Price

$308.74

Key Data Points

Market Cap

$4.3T

Day's Range

$293.70 - $309.42

52wk Range

$201.50 - $317.40

Volume

4M

Avg Vol

53.9M

Gross Margin

47.86%

Dividend Yield

0.34%

Apple's customer loyalty

Apple has maintained a general customer retention rate of more than 90% for years, according to SQ Magazine. Customers keep coming back because they greatly appreciate the brand -- and, in many cases, they own several Apple products and like that these devices work together seamlessly.

So I don't think there's a great risk of Apple missing out on sales due to its higher prices. Meanwhile, the company didn't take the move lightly, saying it's "working tirelessly to find solutions."

Of course, some cost-conscious buyers might delay investing in a new Apple device due to the price increase, but I don't think this will be an enormous trend that will pressure earnings over the long term.

Considering all of this, is Apple a buy today? As mentioned, the company's earnings track record and brand strength make it a fantastic investment. Another important point to consider is valuation, and here, we can see that it's higher than it was earlier this year.

AAPL PE Ratio (Forward) data by YCharts

Still, at today's level, Apple is reasonably priced in light of its earnings performance over time and its prospects. And that means, even though the company recently made a controversial move, the stock remains an excellent buy today.