Apple is Selling Off — Is This Time to Bail?

Stock (Symbol)

Apple (AAPL)

Stock Price


Data is as of
June 6, 2017
Expected to Report
Jul 24
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
David SharekLast qtr I began my AAPL research report with “I was wrong about Apple (AAPL) stock, but I still think you should sell it”. Since last qtr the stock is up from $132 to $155, thus I was wrong again. But since these charts were made last week, the stock’s dropped to $145, breaking its 50-day moving average today. So is this time to sell? I think so. There are a few reasons why AAPL went from a low of $90 to $150 since last July, with the main being the P/E went from 11 to 17. I sat on AAPL a long time when the P/E was 13 or 14 and the stock was really stuck at that valuation for a while. It was frustrating. And if you think the stock suddenly deserves a premium valuation when it’s essentially the same company, you need a history lesson. Here, I’ll do your homework for you. Below are AAPL’s qtrly profits during fiscal year 2015 & 2017:

Q1 $3.06 $3.36
Q2 $2.33 $2.10
Q3 $1.85 $1.57e
Q4 $1.96 $1.89e

These numbers above show 2015 profits, followed by 2017. So the only qtr that’s higher this year is Q1. The “e” qtrs are estimates for the next 2 qtrs. So basically the stock is worth WAY more now when profits aren’t even on 2015’s level? BTW AAPL had a median P/E of 12 that year. With the stock now selling for 16 to 17 times earnings, this is a good time to sell, as the stock could go to the $120s. But I do like AAPL for conservative accounts and feel it can go to $157 by next year. 

One Year Chart
This stock really took off when profit growth was meh. Last qtr was the only good one in the last four, as profits grew 11% year-over-year (but were still below 2015’s qtr). Sales increased 8%, but were still below 2015’s qtr. Qtrly profit growth Estimates look good with views of 11%, 13%, 12% and 20% the next 4 qtrs as the NEW iPhone could spur demand. The Est. LTG of 11% is decent when you consider the stock pays a 2% dividend. The P/E of 17 is up from 15 last qtr.
Fair Value
My Fair Value is 15x earnings, which is $134 this year and $157 next year. AAPL has a fiscal year end on September 30th, so next qtr I will look ahead to 2018’s figures. And if the stock is $157 next qtr it will be ironic, because if you can’t already tell I’m an Apple bear. Also, 2017 profit estimates have stayed the same during the last year, but 2018’s have gone from around $10 to around $10.50 so that’s  good.
Bottom Line
Apple has been a tough stock to handle the past five years, as it seems to have a mind of its own. Right now the stock looks extended, but it has fallen to $145 since these charts were made last week and I think it could decline to its 200-day moving average. Apple shouldn’t be considered a growth stock anymore. But it is a juggernaut that pays a nice dividend, thus I have it on my radar for the Conservative Growth Portfolio. I am inclined to buy AAPL if the stock falls to the 200-day moving average, which is currently $127.
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