Apple Inc. (NASDAQ:AAPL) has struggled in recent months. The iPhone, which accounts for almost 70% of AAPL revenue, saw lackluster sales in its latest iPhone product launch. Since that release, AAPL stock appears to have built a ceiling in the low $180s per share range. This stagnation has left investors wondering whether Apple is a buy or sell.

The iPhone X Disappoints With Sales, Impresses With Profits

To be sure, investors have cooled to Apple stock since the iPhone X launch. Since the iPhone is serving as its most significant revenue source, the product arguably serves as a proxy for AAPL stock itself. A mediocre iPhone X sales record has given AAPL stock a lackluster performance.

Pricing may be to blame. A recent survey revealed customers felt at a base price of $999, the phone’s price is too high. That price also did not include extra benefits such as a fast charger or a phone case.

Moreover, the price increase also likely came too early. With 5G availability coming quickly, the iPhone X will lose its appeal sooner rather than later. If the next release includes 5G capabilities, more customers will likely be more willing to pay this higher cost.

However, this stagnation creates a buying opportunity for many reasons. For one, what the iPhone X has lost in sales, it has made up for in profits. As our own Brad Moon pointed out, Counterpoint Research revealed that the iPhone X accounted for 35% of all handset profits in 4Q 2017. AAPL accounted for 86% of profits.

Samsung Electronics Co Ltd (OTCMKTS:SSNLF) accounts for only 5.7% of smartphone industry profits from its two latest Galaxy releases. So, while the pricing might have turned off customers, it delivered strong results for investors.

5G Could Drive AAPL Stock Higher Soon

Also, as I mentioned earlier, I think 5G will serve as Apple’s next great growth catalyst. Technological advances made the original iPhone possible. This went on to become the most successful product in Apple history. 5G will make customers more willing to pay $999+ for an iPhone. More importantly, it could create new product lines for AAPL not possible today.

Even though AAPL can no longer rely on Steve Jobs for its next creation, it holds the largest cash position of any company anywhere. This cash should give the company what it needs to either create or buy the technology to build compelling 5G products.

AAPL Stock Can Grow Even if the PE Does Not

Despite its large market cap, the stock has always remained cheap on a price-to-earnings (PE) basis. Its PE stands at 18, a level similar to where AAPL has traded in recent years.

For whatever reason, Apple has never commanded the triple-digit PE ratios of an Amazon.com, Inc. (NASDAQ:AMZN). It has even failed to attain the higher ratios seen in Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) or long-time rival Microsoft Corporation (NASDAQ:MSFT).

Hence, AAPL has had to rely on profits to attain and hold the world’s largest market cap, which stands at about $900 billion.

Still, even if this PE continues to stay the same, the stock should trend higher. Profit growth, which had remained stagnant for the last three years, is set to resume a double-digit growth rate over the next three years. The long-term growth rate of the S&P 500 stands at about 10%.

Given profit growth and historical trends, I expect the stock to at least deliver a comparable or better performance. Buying at a $900-billion market cap will not make investors rich. Still, AAPL stock could keep investors rich, or at least earn them enough profit to afford $999 iPhones.

Bottom Line on AAPL Stock

As for the question of whether you should buy Apple stock, I believe the answer is yes. There’s little doubt the hefty price increase on the iPhone proved too much for many consumers. Customers will likely need an upgrade such as 5G capability before they spend that large of a sum on a new phone.

However, I think the data also show that investors should not sell AAPL stock. AAPL and its iPhone dominate handset profitability. Moreover, analysts expect double-digit profit growth to return for the next few years. Even if AAPL stock maintains historical PE levels, the price of the equity should rise.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.