Here's My Top "Magnificent Seven" Stock Pick for 2026

Core Viewpoint - Apple is adopting a more measured approach to AI investments compared to its peers in the Magnificent Seven, while still demonstrating strong growth in its core business and services segment [1][10]. Financial Performance - Apple reported a record fiscal year with revenue increasing 8% year over year to $102.5 billion in the fourth quarter, up from 6% growth in the same period of 2024 [4]. - Earnings per share rose 13% year over year on an adjusted basis, marking the second consecutive period of accelerating profit growth, with double-digit earnings-per-share growth for the full fiscal year [4][5]. Services Growth - Services revenue grew 15% year over year in fiscal Q4 and 13.5% for the entire fiscal year 2025, contributing significantly to total sales and profits [5][6]. - The services segment has about twice the gross profit margin compared to the hardware business, helping to mitigate volatility in hardware sales [5]. Device Ecosystem - The installed base of active devices reached a record high in fiscal Q4, which is crucial as Apple generates revenue not only from hardware sales but also from the lifetime usage of its products [6]. Future Guidance - For fiscal Q1, Apple forecasts revenue growth of 10% to 12% year over year, with iPhone revenue expected to grow at a double-digit rate and services revenue to expand similarly to fiscal 2025 [7]. Capital Expenditure Strategy - Apple's capital expenditures for fiscal 2025 totaled $12.7 billion, a 34% increase year over year, reflecting a cautious approach compared to peers like Meta Platforms, which had significantly higher expenditures [9][10]. - The company is increasing investments in AI while maintaining a focus on its product roadmap, indicating a strategic but measured approach to AI development [10]. Valuation and Growth Outlook - Apple shares are currently trading at about 34 times forward earnings, suggesting that investors anticipate double-digit earnings growth in the future [12]. - With the growth of high-margin services revenue and the rollout of new AI features, a double-digit compound average annual growth rate in earnings per share over the next five years is considered highly likely [12].