Is Apple now a value company or still a growth stock? It has been paying a dividend for over a year now and that has always been a signal to the market that a company has reached the end of its growth spurt. It is sort of like when a band puts out a Greatest Hits CD. They are in essence saying they are done and tapping out.
But are Apple’s best days really behind it?
Will the stock every reach its highs it achieved in October 2012 at over $700 a share. Is there a catalyst to propel the stock to $1000 a share? Yes, I think so.
New Apple Products Arriving This Year
Apple has not released a new product line since the iPad was introduced in 2010. Before that, the iPhone was released in 2007. So if history is any indication 4 years is around the time for their R&D to churn out new product lines and Wall Street is expecting two big ones this year.
First, Apple will release an iWatch and the market is expecting this to go mainstream. This is not just simply a watch or a fitness monitor. Speculation is that the iWatch will actually incorporate medical data, a health monitor which communicates with doctors and hospital records. All the signs are there to support these rumors. In fact 9to5 Mac reported recently that Apple is developing an app called Healthbook as an ecosystem for health app developers.
Perhaps it will also function as a type of Life Alert device and a monitoring device for the elderly. My 90 year old grandmother wears one of those Life Alerts around her next, so I could see her keeping something like this on her wrist too. The market for this could be huge with the aging population.
Second, some type of television product is expected to finally arrive late this year. Wall Street has been waiting for this one for a couple of years. Apple is already rumored to be in talks with major cable companies for content. So just how this TV project will work is a mystery at this point.
One could envision a television looking like the interface of an iPad or iPhone when you first turn it on. Rather than seeing live tv, you would see a collection of apps, one possibly being Live TV which would be connected to the cable content.
Another app on the screen would be Netflix, Hulu Plus, Pandora, and so on. Again, no one really knows how Apple is going to enter this area, but if their entry into the music industry with iTunes is any indication, it will be a game changer. This is a product that I am really excited to see. I hope it is actually released and is not simply a huge head fake. Everyone knows it has been under development for years, but whether they can actually make it work effectively remains to be seen.
New iPhone in August
Apple is expected to launch a new iPhone in the second half of this year, and if history is any indication it will be around August or September in time for the holiday season.
In fact, the rumored name of the new phone will be the iPhone Air which is expected to come in two different screen sizes: 4.7-inches and possibly 5.5-inches. To put that in perspective, the latest iPhone 5s has a 4 inch screen.
So if you are in the market for a new phone or are due for an upgrade with your carrier, you might want to wait until the fall to see Apple's latest offerings before going for last year's model.
Stock Held the 200 Day Moving Average
After the 1st quarter earnings release on January 27, the stock sold off because Wall Street was disappointed by the number of iPhones sold in the quarter. Subsequently, the stock sold off its recent high of 571 all the way to 490 in the following days. However, it bounced off its 200 day moving average of 480 and has been steadily climbing for the last 3 weeks.
While it may be overbought in the short-term, picking up shares on any pullback from its recent high of 545 would seem wise. After all, if Apple traded at the same multiple that Google trades at, the stock would be currently priced at $1245 a share.
Impact from China Mobile Deal
Apple signed a deal with China Mobile, the country’s largest mobile carrier, in December and begin selling the iPhone 5c and 5s in China in January 2014.
The revenue from that deal will not show up until the 2nd quarter of this fiscal year, but given the fact that China Mobile has 700 million subscribers, the impact could be huge on Apple’s bottom line.
Buy the stock anywhere in the low 500s. You have just been given a 25% off sale on the stock from early January.
Apple is not going away. It has a diverse product line, new products on the way and a huge amount of cash reserves to weather any storm.
In fact, Apple recently spent $14 billion buying back its own stock in an effort to support the stock after the sell-off when the Q1 earnings were released in late January. CEO Tim Cook hinted that more would follow. It is rumored that Apple will buy an additional $18 billion worth at some point this year. A company usually does not buy back its own stock unless they have big things coming in the near term so you should probably take that as a hint of the stock’s direction the rest of this year.