Contrary to Reports, Apple is Looking Good

Stock (Symbol)

Apple (AAPL)

Stock Price

$173

Sector

Technology

Data is as of

February 15, 2018

Expected to Report

Apr 30

Company Description

Apple’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. Source: Thomson Financial

Sharek’s Take

Apple’s (AAPL) just declined from a high of $180 to a low of $150 before/after earnings due to negative sentiment on its…what would you call it…iPhone 10 catalyst?…its future? I dunno, but it was all over the news that AAPL was bad. I’m looking at the numbers, and the numbers look great.

Profits rose an average of 17% the last 4 qtrs.
and are expected to climb an average of 28% the next 4 qtrs
AAPL stock has a P/E of 15

Now where people make mistakes with Apple is when:

Investors looking at good profits ahead and think the stock will go up — then it doesn’t. I made this mistake before. It’s like riding a wild horse, you can’t control it. Just hold on.
People thinking the P/E should rise to 20. Then it stays around 15.

Apple is primarily a hardware company. One with no break through products in years. And none on the horizon. Yes service revenue (from things you buy from Apple) is becoming a bigger portion of total revenue, but not enough to make a difference. Especially if iPhone growth slows. So lower your expectations and you should do fine. AAPL has an Estimated Long Term Growth Rate of 12% a year, in addition to a 1.5% yield. So think of this as a 13% grower with a 15 P/E. Profits are expected to be much better than 15% this year, so the stock is undervalued. But remember don’t make a big bet on the stock going a lot higher. Just enjoy the ride. The ETFs and the S&P 500 are attracting inflows of money, and a lot of that will go AAPL’s way. I believe the stock is on its way to $200 and beyond, I just don’t know when.

One Year Chart

Profit growth of 16% last qrt beat analysts estimates of 12%. Sales increased 13%, not bad. iPhone, iPad and Mac unit shipments were around what they were a year ago — which means no catalyst to fuel profit growth so a high P/E will be tough to come by. 2018 profit estimates increased from $11.44 to $11.55. Qtrly profit Estimates are a robust 29%, 33%, 28% and 20%. Nice low P/E of 15,.

Fair Value

Also, AAPL doesn’t have much consistency in its profit history. So again, this shouldn’t be considered a stock market leader. But profits are expected to grow 25% this year. That’s great! And my Fair Value of 17x earnings is reasonable. This suggests solid upside for this stock in the coming two years.

Bottom Line

Apple had a swift pullback this month after negative news was put out by the media. But when I look at the fundamentals, the numbers look great. So if you’re a small investor, don’t get shook out. The stock is $173, just went through a correction, and could break out to a new All-Time high anyday. I feel $200 is the next stop, followed by $225. That’s a 30% gain — plus the dividends. Still, I wouldn’t buy a stock option on it. AAPL ranks 6th in the Conservative Growth Portfolio Power Rankings. The stock ranks 15th in the Aggressive Growth Portfolio and Growth Portfolio Power Rankings. I think the negativity towards the stock is “fake news” to entice people to sell.