Why I'm Sticking With The Apple (AAPL) Bulls

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We all know the story by now: The markets are falling, and FAANG stocks – the five tech giants Facebook, Amazon, Apple, Netflix, and Google – are leading the way down. The losses have been heavy. Apple, Inc. (AAPLResearch Report), for example, is down 23% from its October 3 all-time peak of $232. The loss in market cap is just as large. Apple has dropped from $1.1 trillion to its current $847 billion in just eight weeks; a loss of $254 billion dollars.

The story could end there, except that in the last nine days Apple’s losses have slowed and started to turn around. The company finished Friday’s trading with a loss of only a half percent, but Apple is finding fans among both analysts and financial bloggers. So, which is it? Is Apple on the way down, or is there a strong bullish case to make for this stock? Let’s see what TipRanks’ top-rated analysts and bloggers have to say, as well as take a look at the stock’s current status.

What the Bears are Saying

The company’s detractors have plenty of evidence. In recent weeks, Apple has announced it will stop releasing regular sales data on its various iPhone models, a move many are attributing to a desire to cover up bad news.

At the same time, Apple has announced that it will be offering more lucrative trade-in credits for customers who return old iPhones when upgrading to newer models. The credits run from double the normal offering ($150 for an iPhone 6, instead of $75) to lower increases of $25 to $50 on iPhone 7 Plus or 8 models. The move is generally seen as an effort to boost holiday-season sales numbers in the face of falling demand.

Apple is also facing issues from lower down the supply chain. Several of the companies which supply parts and components to Apple have been cutting their revenue forecasts in anticipation of lower iPhone sales. Qorvo (QRVO), which makes radio frequency chips for wireless connected devices – read, iPhones – has reduced its guidance by 5%, and Lumentum (LITE), which produces the 3D sensing lasers used on iPhones’ front facing cameras, has reduced its outlook by $70 million.

In short, Apple is facing lower iPhone sales as the smartphone market matures, and the company is scaling back expectations in response. To compensate, Apple is turning more to its service segment (Apple store, music, etc.), but that transition is not complete. The result, especially in a general market downturn, is what we are seeing in the stock price: AAPL has declined.

Turning to the Bulls

Despite having slipped to a six-month low, Apple still has its boosters. These investors and bloggers are attracted by the company’s obvious strengths: a popular product line; that expanding services segment; and at $847 billion, still the largest market cap of any publicly traded company.

The analyst consensus on Apple is currently a ‘Moderate Buy.’ AAPL stock holds 14 ‘buy’ ratings, 11 ‘hold’ ratings, and a single ‘sell.’ The average price target is $230; compared to the share price of $178, that gives a 29% upside potential.

View AAPL Price Target & Analyst Ratings Detail

RBC Capital analyst Amit Daryanani (Track Record and Ratings) gives Apple a ‘Buy’ rating with a $235 price target. He cites Apple’s “strong balance-sheet, aggressive buyback, and ability to drive gross margins higher” as reasons for an optimistic outlook on the stock. Daryanani boasts a 76% success rate when recommending AAPL, and an average return of 22.3%.

He’s not the only analyst to give a positive rating to Apple recently. Wedbush’s Daniel Ives (Track Record & Ratings) says that he “[S]trongly believes that the valuation on the name at current levels and further monetization of its 750M-plus active iPhone installed base through future upgrades and a $50B-plus services revenue stream speaks to a bullish thesis on Apple for the coming years.” His price target of $275 gives a 54% upside from current levels.

The financial bloggers also have not been shy elaborating on the upside of Apple.

Nicholas Ward (Track Record & Ratings) sets out a powerful conservative investing case for Apple, explaining in great detail how the stock is a near-perfect long-term investment. His case is summed up in one line: “I've made good money buying Apple on the dips, so I decided to follow the old saying, ‘if it ain't broke, don't fix it.’”

Ward also cites Apple’s steady dividend payments, noting that while the percentage payout is low, the long-term increases are an attractive feature.

Blogger Will Ashworth (Track Record & Ratings) concurs, noting Apple as one of his “best stocks to buy for the next decade.” Ashworth looks at Apple’s past performance and actions, and says, “I have a feeling Apple will continue to create products people want to buy for years to come. What these products are, I couldn’t tell you. What I do know is that Apple will continue to generate a huge amount of free cash flow to reward shareholders for their patience and loyalty.”

Ashworth’s comments are worth noting as a great description of the best type of company for long-term investment: A reputation for profitable innovation, and loyalty to shareholders.

On a final note, regarding loyalty to shareholders, Apple has paid out a dividend every quarter for the last six and a half years. The normal yield is low – typically 1.5 to 2% – but it is consistent, and Apple has declared that regular dividend payment, as a reward to investors, is a company policy. For that reason this is a stock I am hanging on to for now.

Author: Michael Marcus. The author of this article currently holds a long position in Apple, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks , Investing Ideas
Referenced Symbols: AAPL

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