Note: Apple stock closed over $600 on the day I wrote this 5/5/2014
The day before Apple’s earnings I wrote that they were a Big Bet Stock Pick and while I got some things wrong in that piece, anyone who bought the stock before earnings is very happy today. I mistakenly, like just about everyone else, thought the earnings would be flat and unexciting causing the stock to go down like it has done for several quarters now. My thinking was that Apple was a long term play (it still is) and that buying before the iPhone 6 launch would be a winning trade.
As we all know now, Apple has decided to raise their dividend, split the stock 7 to 1, and add $30 billion onto their buy back program. Add to that iPhone earnings that were better than any analyst had projected and you got a stock that went up about $70 in the next week.
Great Earnings Now Bodes Even Better For New Products Later
One of the things I liked best about the earnings was that China is the fasted growing geographical region for revenue growth. THAT is big as so many pundits and Apple naysayers have repeatedly drummed into us the notion that the Chinese can not afford the high priced iPhone. They say Apple will basically fail in China and now we know that is incorrect. The new iPhone 6 that is supposed to have a larger screen when it is released later this year should fly off the shelves. The Chinese are, numerous reports say, lovers of the bigger screen Galaxy and Galaxy Note phones so when a bigger screen iPhone is introduced, they should buy it in droves.
The more iPhones in people’s hands mean the more people using the Apple ecosystem. Those customers are then more likely to buy the Apple TV refresh that will probably happen in the second half of 2014. They also will be more likely to buy the new iWatch that will be released either in later this year or in 2015. I don’t like the growing consensus that the iWatch may not come out in 2014 but as a long term investor, I know that waiting for a winning product is better than Apple releasing something that isn’t quite ready. Buying stocks with a long time horizon is a winning strategy and I believe Apple is one of those stocks for patient investors.
Apple Finally Has Headwinds Behind It
After close to two years of predominantly negative headlines about the stock, investors finally have concrete reasons to buy. These just released earnings numbers show that Apple is gaining customers all over the world and retention rates remain in the upper 80% region. The often reported demise of Apple is FALSE.
The new products/services that Apple has lined up will most likely include a payment processing system that few people speak about today but could reap huge rewards within 5 years. Patient investors will be rewarded if/when that happens.
The stock will be splitting in about a month’s time and when that happens, smaller investors will finally be able to buy the stock which can only benefit the price.
This year’s release of the iPhone 6 could be the biggest upgrade cycle the company has ever experienced and that would propel the stock higher as the year progresses.
The iWatch may not get here this year but the buzz will be high whenever it does happen and reports continue to surface that high level medical experts are being hired by Apple to help with the device.
These are just some of the reasons that Apple stock is still a buy at the $600 level. Anyone who buys now for at least a 6 month time horizon, should be happy they did so.
*Disclaimer: please remember that this website is not responsible for your stock investment choices and everything written here is just an opinion. Please consult your professional financial advisor before making any decisions about how to invest your money.