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Why Apple Is Worth Buying


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Apple Is Worth Buying At Current Levels

Apple Is Worth BuyingWith the once high flying Apple now suffering the stock market doldrums, many investors are wondering if Apple is worth buying? Apple’s stock (AAPL) has made an enormous gain of more than 5,000% since technology stocks bottomed in 2002, in the wake of the 2000 technology bubble.  Apple’s stock made to the $700 level in 2012, and has since dropped and plateaued in the $425 to $475 range.  Even though Apple is no longer a technology stock momentum trade, Apple is worth buying under $500 based on valuation measures.

The Case Regarding Why Apple Is Worth Buying

There are a number of reasons why Apple is worth buying after the company’s stock AAPL suffered a steep decline in late 2012 and early 2013.  With a stock price to earnings (P/E) multiple of approximately 10 and revenues and earnings continuing to grow, Apple has a compelling valuation, especially for a technology company.  Apple recently earned over $44 per share and has over $137 billion in cash on its balance sheet.  That cash is literally burning a hole in Apple’s balance sheet.  The company needs to find ways to use the cash in ways that increase shareholder and company value, instead of parking it in investment grade securities that barely even keep up with inflation, if they do at all.  An analyst that has followed Apple for a long time, Morgan Stanley’s Katy Huberty, recently met with Apple’s Chief Financial Officer (CFO) and came out of that meeting with the belief that Apple is poised to dramatically increase their annual cash dividend per share from $10.60 (2.40%) per share to closer to the S&P 500 average for dividend paying companies, which is approximately 6.00% per share.

Apple’s biggest challenge in the near term is dealing with low cost competitors, such as Samsung, and entering the China market directly via a deal with China Mobile.  There is a great deal of speculation that Apple is developing a cheaper iPhone to compete with Samsung and to entice more Chinese to buy iPhones.  Additionally, mobile phone chip maker Qualcomm recently announced that they are going to release mobile phone chip sets in the second half of 2013 that will allow universal access to all world mobile phone networks, including China Mobile’s network.  This development may open the door to a deal between Apple and China Mobile to offer an official iPhone for the China Mobile network.  If Apple plays its cards right, their stock AAPL may be sitting at a sweet spot below $500 per share.

This article about why Apple is worth buying is just an opinion piece, and is not a solicitation to buy Apple’s stock AAPL.

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