What a long, strange trip it's been.
After cratering in late 2012 and languishing for much of 2013,
shares of technology powerhouse
(Nasdaq: AAPL) have rallied to fresh all-time highs above $101,
when adjusting for Apple's recent 7-for-1 stock split.
There's certainly plenty of reason for investors to be
. In the months ahead, Apple will introduce its highly
anticipated iPhone 6, unveil the latest upgrade to its iPad line
of tablets, and launch some kind of long-awaited new product as
well (perhaps an iWatch).
However, amid all this commotion, the most pertinent question
for investors today should be whether Apple stock remains a buy
at or above its new $100 levels. I certainly believe so. Here's
Apple stock: Is the juice worth the squeeze?
The prospect of returned revenue and profit growth from a number
of drivers has been the primary engine fueling Apple stock's
recent rally. As the result of a number of upcoming product
moves, investors are widely expecting Apple to enter a new phase
of growth and innovation, and I tend to agree.
By far the single most powerful contributor to this new growth
period will be the iPhone 6. Although it seems few discuss it,
Apple's iPhone installed base is due for an upgrade. In the
United States, a whopping 49% of iPhone owners currently use
either the iPhone 4 or 4s according to data from researcher
Kantar. Similarly, the iPhone 4 and 4s represent an astounding
69% of iPhone users in China. Although probably not perfectly
representative of the Apple's global iPhone installed base, the
overarching point remains--a significant portion of iPhone owners
will be ready for an upgrade when the iPhone 6 rolls out globally
later this year. The upcoming iPhone 6 launch is by far the most
powerful near-term catalyst for Apple, but is by no means its
only growth tailwind.
Although it's less clear the degree to which it could impact
Apple's financials, many hope that Apple's planned refresh of its
iPad tablets could also help reinvigorate Apple's ailing tablet
business. And then there's the matter of Apple's upcoming iWatch.
Although projections on potential iWatch shipments probably
aren't even worth monitoring at this point, it's hard to overlook
the highly attractive margin profile for the global watch
industry, which would certainly be accretive to Apple's overall
Rallying but still cheap
Although it isn't selling for the rock-bottom prices of mid-2013,
Apple stock is still by no means expensive either. It's current
price-to-earnings ratio of 16x, although still lower than that of
the overall market, continues to partially mask the relative
bargain that is Apple stock. In my mind, Apple's massive overseas
cash hoard makes metrics like Apple's EV-to-free cash flow
multiple of 12x a better barometer of Apple's relative cheapness.
Let's stop and consider Apple's current total cash yield.
AAPL EV-to-FCF multiple
AAPL Total Cash Yield
So buying Apple at today's historically elevated prices will
still net investors a virtual cash yield of 10%. That's certainly
well below the kind of historical return profile we're accustomed
to from Apple, but it's certainly an attractive overall
risk-reward proposition in today's low yield environment.
Beyond that, factoring in additional tailwinds such as Apple's
ongoing and highly accretive share buyback program, reduced
margin pressure from warranty issues, and the multiple top line
growth drivers outlined above, and I'll certainly contend that
Apple stock still provides plenty of opportunity for investors at
its current levels.
Apple's years of mega-growth are gone forever. Although I
contend this line of thinking is somewhat erroneous, there's no
denying Apple is a victim of the law of large numbers to some
extent. However, for investors looking to own a safe, relatively
stable stock that I believe should still thrive in the years
ahead, adding Apple to your portfolio certainly wouldn't be the
Leaked: Apple's next smart device (warning, it may
Apple recently recruited a secret-development "dream team" to
guarantee its newest smart device was kept hidden from the
public for as long as possible. But the secret is out, and some
early viewers are claiming its everyday impact could trump the
the iPad. In fact, ABI Research predicts 485 million
of this type of device will be sold per year. But one small
company makes Apple's gadget possible. And its stock
price has nearly unlimited room to run for early in-the-know
investors. To be one of them, and see Apple's newest smart
Apple Stock Surges Past $100, But Is It Still A
originally appeared on Fool.com.
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