Apple: Is It Time To Buy?
After throwing money at the market for over 10 years now, I know full well that some of the best trades or investments don’t involve timely execution or well-priced entries, but rather sitting on my hands and doing nothing at all.
#-ad_banner-#With all the excitement and buzz surrounding Apple (Nasdaq: AAPL) and its 7-for-1 stock split last week, I thought best to let the market digest a full week of trading, commentary and analysis before even discussing if the stock is still a viable investment after its “change.” (At the time of the split announcement on April 23, my colleague David Sterman considered that same point.)
Save a few quick traders who darted in and out for a profit, investors who bought in on Monday likely ended the week down. Hindsight will say that the real trade would have been to buy AAPL at the time of the split announcement.
As most of us are without crystal balls, however, it’s time to make a case for AAPL going forward.
We’ve had the opportunity to filter out some noise and digest a week or so of post-split trading, so what can we expect from here on out? Let’s take a look at some of the factors that will help — or hurt — Apple’s stock price in the near and long term.
First off, from a fundamental standpoint, Apple is still very much poised for future growth. A low price-to-earnings (P/E) ratio, increasing revenue, a strong cash position and high gross profit margins helped prompt the split in the first place — and still make a strong case for long-term appreciation.
Flickr/janitors | ||
Apple’s agreement to sell its products in China through China Mobile will likely help its future growth. |
Apple’s agreement to sell its products in China through China Mobile (NYSE: CHL) will likely pad those numbers positively as well. (In fact, my colleague Marshall Hargrave recently identified AAPL and CHL as two of the three best plays on the world’s largest telecom market.) China Mobile’s reach is expansive, catering to three times more subscribers than AT&T (NYSE: T) and Verizon (NYSE: VZ) combined.
For shareholders, Apple announced in April that it would be increasing both its dividend and buyback program. The latter expanded from $100 billion to $130 billion, and the dividend received an 8% bump. Both increase stockholder value and were key in contributing to the rise in stock price before the split.
As the latter half of the year approaches, we will likely be privy to the next wave of Apple’s product launches (the current crop of rumors includes the unveiling of an iWatch and an iPhone 6 with two screen sizes). Along with the company’s recent purchase of Beats Electronics, Apple could make both consumers and shareholders happy on the hardware front. Software-wise, AAPL unveiled the next generation of its iOS operating system this month, and the Beats purchase added another digital music marketplace to Apple’s offerings with its streaming music service.
One final note about AAPL’s post-split price: The stock is now at an acceptable range to be included in the Dow, if such a shuffle were to occur. Although much broader and better-weighted indices exist (such as the S&P 500), the Dow is still often used (mistakenly, in my opinion) as the barometer for whether “the market” was up or down on the day. Apple’s new price puts it in line with the average price of other Dow components (though one of them would have to drop off the list before AAPL can be included).
Risks to Consider: Investors and traders have been quick to turn on Apple in the past (see the drop in price after the company’s earnings report in January, despite issuing a beat). Keep rumors in mind and concentrate on factual catalysts when digesting any news for new or existing positions of AAPL.
Action to Take –> Now that some of the emotion and fanfare has died down, we should resume focus on the drivers that will spur growth in stock price when considering AAPL as an investment. All glitz and glamour aside, Apple is still a strong company with continued growth potential — any dips from here on out could be great opportunities to accumulate.
AAPL is just one of 13 stocks we’ve discovered that controls an enormous share of the $1.9 trillion “Dividend Vault.” In our latest report, we talk about 12 other “Dividend Vault” stocks, including a global powerhouse that’s increased its dividend 633% in the past two years, plus another firm that’s boosted its dividend 131% since 2011 and still yields 10.8%. To get more info on these stocks before they start mailing their next “Dividend Vault” checks, follow this link now.