Is it time to buy Apple?

After the market digested the company's stock split, shares are again near all-time highs. Is now the time to buy?

By StreetAuthority Jun 26, 2014 4:44PM

Credit: © George Rose/Getty Images
Caption: The exterior of the downtown Apple Store in Central Hong Kong is viewed on May 27, 2014, in Hong Kong, ChinaBy Eric Winter, StreetAuthority


After throwing money at the market for over 10 years now, I know full well that some of the best trades or investments don't involve timely execution or well-priced entries, but rather sitting on my hands and doing nothing at all.


With all the excitement and buzz surrounding Apple (AAPL) and its 7-for-1 stock split this month, I thought best to let the market digest a full week of trading, commentary and analysis before even discussing if the stock is still a viable investment after its "change." (At the time of the split announcement on April 23, my colleague David Sterman considered that same point.)


Save a few quick traders who darted in and out for a profit, investors who bought in on the Monday after the split ended the week down. Hindsight will say that the real trade would have been to buy AAPL at the time of the split announcement.


As most of us are without crystal balls, however, it's time to make a case for AAPL going forward.


We've had the opportunity to filter out some noise and digest more than a week of post-split trading, so what can we expect from here on out? Let's take a look at some of the factors that will help -- or hurt -- Apple's stock price in the near and long term.


First off, from a fundamental standpoint, Apple is still very much poised for future growth. A low price-to-earnings (P/E) ratio, increasing revenue, a strong cash position and high gross profit margins helped prompt the split in the first place -- and still make a strong case for long-term appreciation.

 
Apple's agreement to sell its products in China through China Mobile (CHL) will likely pad those numbers positively as well. (In fact, my colleague Marshall Hargrave recently identified AAPL and CHL as two of the three best plays on the world's largest telecom market.) China Mobile's reach is expansive, catering to three times more subscribers than AT&T (T) and Verizon (VZ) combined.


For shareholders, Apple announced in April that it would be increasing both its dividend and buyback program. The latter expanded from $100 billion to $130 billion, and the dividend received an 8 percent bump. Both increase stockholder value and were key in contributing to the rise in stock price before the split.


As the latter half of the year approaches, we will likely be privy to the next wave of Apple's product launches (the current crop of rumors includes the unveiling of an iWatch and an iPhone 6 with two screen sizes). Along with the company's recent purchase of Beats Electronics, Apple could make both consumers and shareholders happy on the hardware front.


Software-wise, AAPL unveiled the next generation of its iOS operating system this month, and the Beats purchase added another digital music marketplace to Apple's offerings with its streaming music service.


One final note about AAPL's post-split price: The stock is now at an acceptable range to be included in the Dow Jones Industrial Average ($INDU), if such a shuffle were to occur. Although much broader and better-weighted indices exist, such as the Standard & Poor's 500 Index ($INX), the Dow is still often used (mistakenly, in my opinion) as the barometer for whether "the market" was up or down on the day. Apple's new price puts it in line with the average price of other Dow components (though one of them would have to drop off the list before AAPL can be included).


Risks to consider: Investors and traders have been quick to turn on Apple in the past (see the drop in price after the company's earnings report in January, despite issuing a beat). Keep rumors in mind and concentrate on factual catalysts when digesting any news for new or existing positions of AAPL.


Action to take: Now that some of the emotion and fanfare has died down, we should resume focus on the drivers that will spur growth in stock price when considering AAPL as an investment. All glitz and glamour aside, Apple is still a strong company with continued growth potential -- any dips from here on out could be great opportunities to accumulate.

13Comments
Jun 27, 2014 6:13AM
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1999 was a good time to invest in Apple. 
Jun 27, 2014 8:53AM
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Risky to buy now if you are buying long term. There will probably be a surge as we get closer to new products, but then a pull back with the rest of the market. Unless Apple takes a lone dive, I would not buy more until after we know what the fed will do with rates.
Jun 27, 2014 8:20AM
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The younger generation has a head full of liberalism which is a cross between goolosh and mush!
Jun 26, 2014 11:02PM
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Yeah I just ate some, they're delicious.
Jun 27, 2014 11:13AM
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The whole mobile gadget story is getting a little old with gadgets everywhere.
Jun 26, 2014 11:33PM
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no its time to sell apple.Samsung has half the p/E =7 and is more diversified.Also Samsung has no debt and more growth and competition in smartphone is getting stronger and Microsoft nokia is making sexier and better smartphone and also sony is making better and sexier phones in tablets apple is a looser now.Sell high and buy low means 50% discount from today price
Jun 27, 2014 12:59AM
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vegas,  I  told everybody that for the last couple days, too little too late...You don't buy IPOs the day after....imo......Sorry.
Jun 27, 2014 10:02AM
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I don't know, but I just drank my "daily 8oz. glass of juice" doubt that will make the price go up.?


You can normally buy Apples at any Grocer, year round...


"An Apple a day, keeps the Doctor away". 

Jun 26, 2014 10:34PM
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Is it time to buy "Apple"   Noooo..


It's time to buy "GoPro" ... The new kid on the block..

Stocks went up 30% on opening day....

Jun 27, 2014 6:44AM
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Nope, and the younger generation is growing disenchanted with the emphasis on the stock and lack of product. 
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