- Apple stock has gained significantly after bouncing off its May lows.
- The recent rally could prompt investors to take profits at the current price levels.
- However, there are 3 key reasons to buy Apple stock ahead of the upcoming iPhone launch.
Apple (NSDQ:AAPL) stock price has gained 18%+ from its lows of May. The stock closed the last trading session on August 26th at $106.94, up from the May 13th close price of $90.5. With the recent rally in the stock price, an important question on the minds of investors would be if now is the right time to take some profits. However, there are still strong reasons to be a buyer of Apple stock, as explained below.
Apple Stock Runs Up In Price Ahead Of iPhone Launches
Apple stock has, historically, made good gains in the weeks leading up to the iPhone launches. With about 10 days to go for the iPhone7 launch (On September 7), let's understand where Apple stock could be headed in the coming days. From the chart below, we can see how Apple stock price has climbed in the last weeks of August and first few days of September over the last 5 years.
The average gain to peak price in the 10 days preceding an iPhone launch has been over 2% over the last 5 years. Hence, investors looking for short-term profits should go long the stock at the current price.
Also, Apple stock price is currently trading above its key simple moving averages (SMA). The 50-day SMA, at 101.16, is marginally below the 200 day SMA value of 101.68, indicating that a bullish crossover could be just round the corner. Given the potential for a rally over the coming days, the SMA crossover could also provide long term investors an entry point to go long the Apple stock.
Apple Offers An Attractive Dividend Yield
Apple's dividend yield is currently near the higher end of its 5-year range, which could mean that the stock is underpriced, as per some dividend investment strategies. With the current dividend yield of 2.1%, the stock provides income investors with ample reasons to go long the stock, especially in anticipation of the expected capital gains ahead.
Apple 5 year dividend yield
Apple stock Valuations
Apple stock is currently trading on the lower side of its historic valuations. The stock is trading below its average 5 year PE multiple of 13.7, with the trailing twelve months PE multiple (TTM) at 12.5. On an ex-cash basis, Apple stock continues to trade at a PE multiple of around 8, reinforcing the belief that the stock is trading cheap and is attractive in comparison to historic valuations.
Apple bears and bulls are focused on the upcoming launch of iPhone 7. With 10 days to go ahead of the iPhone 7 launch, investors should buy Apple stock to benefit from a potential pre-iPhone launch rally. Also, with the dividend yield near the high end of the historic range and valuations below 5-year averages, Apple stock makes a compelling buy ahead of the upcoming iPhone 7 launch.