Santa was generous to Apple (ticker: AAPL) in 2020.

In its most recent quarter, which ended on Dec. 26, the tech giant racked up record quarterly sales of more than $100 billion for the first time as iPhone demand rebounded and all of the companys other sales categories also churned out revenue increases well into the double digits.

The holiday quarter got a boost from Apples launch of its 5G iPhone 12 models, which helped lift revenue in the companys biggest sales category by 17% year over year. That followed the previous quarters iPhone sales slump as people waited for the new models to be released.

Meanwhile, Mac sales rose 21% year over year, iPad revenue was up 41%, and the wearables, home and accessories category (which includes the Apple Watch) saw a 30% jump in sales. Apples high-margin services business grew by 24%.

All that sales growth helped the company beat Wall Street estimates on its top and bottom lines, with total revenue topping $111 billion and earnings per share (EPS) clocking in at $1.68. EPS grew by 35% year over year in its fiscal 2021 first quarter, which is astounding for a company of its size.

The numbers show how Apple has continued to benefit from the demand for electronics as people work, learn, shop and entertain themselves remotely during the pandemic.

Apples position within the so-called stay at home trade, coupled with its status as a stable company with a massive cash pile, has helped Apples shares hit record highs as investors have looked for relative safety amid the pandemic. That said, the stock isnt cheap. The companys forward price-earnings ratio currently stands at more than 35.

That lofty valuation might keep some investors at bay, but Apple could also be a tempting stock based on current performance and promising longer-term potential. For investors who may be thinking about taking a bite out of Apple, here are a few points to consider:

  • Apple stock at a glance.
  • Pros of buying.
  • Cons of buying
  • Bottom line: Should you buy AAPL?

Apple Stock at a Glance

Founded in 1976, Apple burst onto the scene with the introduction of the Macintosh in 1984, taking the personal computer mainstream. Led by Steve Jobs, who would become the ultimate Silicon Valley icon when all was said and done, the upstart business – which started in a garage – would go up against multibillion-dollar entrenched industry players like IBM (IBM) and Hewlett-Packard (HPQ).

Jobs insistence on building a closed ecosystem instead of catering to the masses out of the gate like Microsoft (MSFT) did make for a slower slog, and he was forced out of his own company, only to return when the company was in deep trouble in 1997.

From there, he built Apple back to prominence – with the iPod, released in 2001, becoming a blockbuster hit for the company. The 2007 release of the iPhone set in motion a practically unstoppable momentum for the company that continues to the present day.

The companys ability to merge its hardware with its own software and its creation of a product ecosystem that includes the iPhone, Mac, iPad, Apple Watch and Apple TV gives a seamless experience across all devices, adding a level of cushioning against the competition in the ever-changing technology landscape.

Pros of Buying Apple Stock

One of the biggest things Apple has going for it is the companys tightly integrated ecosystem of products that work easily with each other and can be connected with the companys iCloud storage and computing service, says Stephen Lee, founding principal with Logan Capital Management.

All those devices and technology working together help differentiate Apple from other companies that are more focused on a single type of product such as smartphones or computers but may not control the software experience like Apple does or have its range of accessories, he says.

Lee is pleased with increases in Mac sales as that segment for a time was becoming comparatively neglected compared with Apples other sources of revenue.

The companys reputation for data security and privacy for those using its devices is another plus, Lee says. People have the perception that Apple is a good steward of their data.

In the short term, Apples shares may continue to benefit from the stay-at-home trade as questions arise about the speed of the vaccine rollout, if the economy will be subject to a double-dip recession and whether President Joe Bidens planned stimulus might get watered down, says Mike Bailey, director of research at FBB Capital Partners.

Cons of Buying Apple Stock

Potential regulatory risk is hanging over Apple as its App Store has come under increased antitrust scrutiny. More broadly, Big Tech is facing increased political pushback as concerns rise about how much power companies like Amazon.com (AMZN) and Facebook (FB) wield.

The App Stores 30% standard commission rate charged to developers seems to be the principal regulatory risk, Lee says. The company cut that rate in half for smaller developers, with annual sales of less than $1 million. While those are the majority of publishers in the store, they accounted for less than 5% of the nearly $60 billion in revenue the App Store generated in the first 10 months of 2020, according to app analytics firm Sensor Tower.

It appears that valuation may also be a risk for investors buying Apple shares right now.

Its crazy expensive, Bailey says. I would be worried. His firm holds a lower percentage of Apple shares than the market as a whole. Although there is probably a low probability for fundamental disappointments, Apples high P/E ratio means theres room for pullbacks if adverse sentiment develops.

The current valuation of a mid-30s P/E multiple is the highest I can remember, says Tim Bain, chief investment officer at Spark Asset Management Group. This makes the stock more vulnerable to broad market corrections and makes it increasingly difficult to exceed expectations.

The Bottom Line: Should You Buy Apple Stock?

Investors are probably wondering how to weigh Apples expensive valuation against its status as a high-quality company with expectations for continued growth.

For those who dont own any Apple stock, Bailey says the company is a good one to have in a portfolio. But for those who own a lot of the stock and dont have any Microsoft, he suggests swapping out some AAPL shares for some of MSFT. He sees Microsoft as a less expensive way for investors to capitalize on Big Tech growth.

Lee says he would be comfortable buying Apple shares at current prices given the durability of its franchise, and price dips would offer good opportunities to buy.

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