- Stay Connected
Gamble Wisely: Apple, Inc.
Apple, Inc. (AAPL)
Almost everyone owns something boasting the Apple logo; iphone, ipod, itunes, Mac computer, Safari, QuickTime– the list is endless. Apple products have been flying off the shelves and into our homes like never before. In fact, Apple Inc. has grown more than 79% over the last five years, and more than 17% in the last year alone. And the inexorable Apple shows no sign of stopping any time soon.
Apple has a P/E (profit-to-earnings) ratio of 30.7x, blasting away competitors like Microsoft by more than 33%. In other words, investors have high hopes for Apple and expect prosperous earnings in the quarters ahead, as they are willing to pay top-dollar for Apple stock; their expectations are certainly well-founded.
Last quarter, Apple beat its predicted earnings by 26%. But this comes as no surprise, as Apple has been surpassing its predicted earnings for the last eight quarters straight, since early 2008. For the next quarter, analysts predict even greater earnings, more than 40% more than they predicted for the last quarter. But given Apple’s impressive earnings trend, an unexpectedly fruitful holiday shopping season, and an improving economy in general, we can expect Apple’s earnings to surprise the analysts once again.
Right now, Apple stock is ripe for the picking. Apple just acquired LaLa Media Inc– a strong indication of the company’s agenda: one of expansion, not of paying off an abyss of debt (as many companies are in the aftermath of the recession). And the bargain: Apple stock is lower than it has been since early November, but with the impending procession of good news, the price won’t be low for long.
So what do you do once you’ve bought a few thousand dollars of Apple stock? You wait. Remember that the stock market is characterized by conflicting optimism and fear. Retain your optimism. Dispose of your fear. And wait. Wait while your shares rise (you could make quick gains selling them around $208 per share). When you see Apple’s growth begin to slow, sell the core to someone else who wants to take a bite.
-Marc Bernstein
Sources:
Scottrade, Inc. (US).
Mbernstein1
December 31, 2009 at 6:03 pm
Please note: Apple Inc. is now trading at $210.73, more than 20 dollars a share and 10% higher than it was when I recommended buying Apple stock. For anyone that may have taken my advice, now is a great time to sell if you are looking to make quick gains. After all, 10% in three weeks is fantastic.
To Alex Bliskovsky: Haha!
Mbernstein1
December 16, 2009 at 7:50 pm
The network failures of AT&T are practically irrelevant. People will buy the iphone no matter what its carrier is.
Regardless, AT&T (actually, another great stock– HUGE dividends) is a significantly larger company than Verizon, its top competitor. When the iphone’s contract with AT&T expires (in about two years, I believe), AT&T will be able to easily outbid all other competitors. AT&T will not lose the iphone.
Furthermore, Alex, as John Benson pointed out, you are comparing two companies that are not heavily competing; Apple and Google are in different financial industries. Google is not robbing Apple of substantial earnings, as its focus is not on computer hardware.
The bottom line, though, is that a stock’s success is based on what investors judge the company’s prospects to be, and Apple’s are the highest in its industry by a mile.
John Benson
December 15, 2009 at 7:45 pm
Can we quantify this “tar” that is being beat out of it? Everyone’s been playing catch-up since Apple first released the iPhone, and no one is quite there yet. Apple’s had plenty of time to plan their next move. Best case scenario is that Android will force Apple to be more innovative.
Besides, Google and Apple aren’t looking for a fight. The two companies have an excellent relationship. Google’s target of choice seems to be Microsoft.
Alex Bliskovsky
December 14, 2009 at 11:59 pm
You should take a look at what’s happening to the iPhone. Combined with the network failures of AT&T, it’s getting the tar beat out of it by the Google Android platform.