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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
David SharekApple’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:

  1. 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.
  2. 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.
 Power Rankings
Growth Stock Portfolio

15 of 39

Aggressive Growth Portfolio

15 of 16

Conservative Stock Portfolio

6 of 32