It's been a tough year for Apple (AAPL 0.06%) investors. The company posted year-over-year sales declines for four consecutive quarters before finally returning to positive growth. Lackluster sales and fears about the iPhone's fading relevance in China have some investors fearing the worst.

One Wall Street analyst believes investors are missing the forest for the trees.

Focus on the long term

Wedbush analyst Dan Ives reaffirmed his price target of $250 on Apple while maintaining an outperform (buy) rating on the stock. This suggests a potential upside of roughly 47% over the coming year, compared to Tuesday's closing price.

While Ives acknowledges the next couple of quarters will be "soft" for Apple, he believes this is a temporary stumbling block. "The good news is help is on the way," Ives wrote, "as we believe a pent-up demand cycle with an artificial intelligence (AI)-driven iPhone 16 model [is] on the horizon."

The analyst has a point. iPhone sales have always been cyclical, with excitement waning between major updates. Furthermore, limited performance upgrades for the iPhone 15 and tough macroeconomic headwinds have conspired to weigh on sales, which have been tepid by Apple standards. But the devil is in the details.

Despite weaker sales, Apple took seven of the top 10 spots on the global list of bestselling smartphones in 2023, according to Counterpoint Research. This suggests a slump in overall smartphone sales, not just the iPhone. Furthermore, when money is tight, consumers tend to trade down to less expensive substitutes, which helps explain Apple's weaker revenue.

A long track record of growth at a discount

Apple has an unrivaled installed base of 2.2 billion active iOS devices. This gives the company a captive audience for its ancillary products and services. Furthermore, iPhone users are extraordinarily loyal, and history shows they're highly unlikely to switch to a competing device.

Finally, at just 28 times earnings, Apple is comparable to the price-to-earnings ratio of 27 for the S&P 500, with much greater potential upside.