Apple\u2019s stock price (NASDAQ: AAPL) has risen some 55% since its January low and the company\u2019s market value is now back above $1 trillion and just $50 billion behind that of Microsoft. However, the share price is still some 6% below its time high of $233.47. The question now is whether it will power through to make new highs or form a double top and retreat. Analysts are widely divided over the future price direction as the company evolves into a very different company. Apple, which has been among the most successful growth stocks of the 21st century is now viewed as a value stock by some investors. Furthermore, the company which has traditionally been a hardware company is now transitioning into a services and media company. For the last five years, earnings and revenues have both grown just over 9% annually. These are hardly the numbers one would expect from a growth stock in the tech sector. But the valuation largely reflects this reality already. The PEG ratio which compares the trailing PE ratio to the annual growth rate is less than 2. This isn\u2019t very high when compared to other tech companies, and especially when you consider the ROI of 26% and the operating margin of 25%. These numbers suggest the company\u2019s valuation is relatively modest. Expanding the ecosystem Despite a number of challenges, Apple is pulling out all the stops to drive growth across the company, and bring new users into the ecosystem. Last week Apple Arcade, a video game subscription service, was launched. The service costs $4.99 a month and gives users access to a growing list of games. Apple Arcade, along with iTunes, the App Store, Apple TV+, Apple Card, iCloud and other services makes for a formidable number of opportunities to attract new customers and expand the revenue base from current customers. Apple's fundamental problem over the last few years has been the fact that the incremental improvements that can be made to the iPhone are diminishing, while competitors are quickly catching up. iPhone sales account for a shrinking share of Apple\u2019s revenue, which is a good thing. As iPhone sales become less important to the top line, investors will become less concerned if iPhone sales are sluggish. However, this doesn\u2019t mean the company is no longer producing hardware that attracts attention. The iPad Pro and pencil is coming out on top among the growing number of artists who use tablets for drawing. While competing drawing tablets sell for comparable prices, they have limited use beyond drawing. Photographers are raving about the camera in the new iPhone 11 Pro, and a number of professional photographers have hinted at being ready to ditch their DSLR cameras. Sales of the Apple Watch and AirPods are also surprising on the upside. The watch is expected to give Apple entry into the incredibly lucrative healthcare market. Furthermore, Apple still holds over $100 million in cash and generates at least $6 billion in free cash every quarter. While share buybacks may begin to slow, they are unlikely to end, especially at current levels. This will continue to cushion the effect on earnings of falling margins. Key risks While the longer-term outlook is improving, there are several risks and concerns in the short term. First, the operating margin has been steadily deteriorating since 2017. As Apple transitions to a different business model, this margin compression may continue for a few more quarters. There are also risks related to both the trade war and possible antitrust legislation. While these risks are real, they are relatively remote. Going into an election year, the Trump administration will be reluctant to escalate the trade war further. And, with regard to antitrust legislation, while Apple is a target it probably isn\u2019t at the top of the list. The short-term outlook is still bullish The risks facing Apple are well known and potential sellers have probably had more opportunity to sell than they were expecting.\u00a0 Most investors currently holding the stock will be looking past the near term uncertainty and are unlikely to change their view unless the fundamentals change substantially. There are rumours of another Apple event in October, and the company\u2019s full-year results are due on Oct. 30. One would assume short-term traders would be more likely to be buying into these events, and new highs may attract some momentum buying too. A breakout is therefore quite likely \u2013 however, beyond that it will depend on the next set of product releases and the next set of results. If margins do continue to fall, there may be a period of uncertainty in the next year, and this may provide a better opportunity for long term investors.