Due to concerns about weak demand for the iPhone and regulatory hurdles, Apple (NASDAQ:AAPL) plummeted by double digits in the first quarter, but some on Wall Street are advising a reevaluation of the stock as the drop has put its value significantly below historical averages, while its core business model remains intact.

Bernstein noted that Apple dropped by 11% in the first quarter, trading at a significantly lower value than its five-year average, with the company trading at about 24 times earnings, but it's not a "terrible price."

Slowed iPhone sales, particularly in the Chinese market, have exacerbated worries about Apple's business maturity. However, the arrival of the iPhone 16 could spark a significant upgrade cycle, with the iPhone 16 potentially featuring artificial intelligence capabilities.

While AI-equipped smartphones aren't novel, Apple may be behind the curve, but history shows that iPhone manufacturers don't need to be first or convince Android users to switch to Apple; they need to convince their current 1.2 billion iPhone users to upgrade.

Experts explain, "When Apple performs well and there's a strong cycle, more consumers change phones. It's not because they gain more Android users or new customers." Pessimists would argue that past expectations for new iPhones leading to massive upgrade cycles have not materialized, raising doubts about whether AI-enabled iPhones have enough appeal to drive upgrades.

iPhone sales peaked at 230 million units in 2015 and have remained relatively stable since then. During this period, Apple maintained double-digit profit growth. This suggests that simply focusing on the risk of iPhone sales overlooks the primary driver of growth - services.

Services are the key growth engine, led by the App Store and licensing fees, the latter of which comes from payments and advertising from Google (NASDAQ:GOOGL), accounting for over 50% of Apple's service sales and over 60% of its gross profit, according to Bernstein.

Apple's App Store strategy has come under scrutiny, particularly in Europe, where a sweeping new law - the Digital Markets Act (DMA) - gives lawmakers more power to crack down on big companies and force them to open up platforms for more user choice.

However, European App Store revenue accounts for only 7% of total App Store sales and 1% of Apple's revenue. The bigger risk is the same regulatory headwinds appearing in the United States, but the current cases by the U.S. Department of Justice "are primarily about trying to open up Apple," according to Bernstein.

There doesn't seem to be "any direct legislation on advertising or the App Store" currently, and these two main profit drivers in the service sector continue to operate.