- Apple’s annual product announcement is tomorrow
- Most analysts are focused on the iPad Pro or iPhone 6s
- The speculative play revolves around Apple TV’s becoming an Internet of Things hub
Early in this decade, Apple (NASDAQ:AAPL) was the most talked-about, and speculative, stock on Wall Street. The death of Steve Jobs in 2011 was followed by a rapid rise for the Apple stock, and then a sickening fall, one that enabled smart investors to get in at about $400 ($60 after the 2014 stock split) a little over two years ago.
Those days are gone. CEO Tim Cook had begun returning capital to shareholders in 2012, with a dividend and massive stock buybacks that in time even included taking out loans for dividends, a tax-advantaged repatriation of some of Apple’s massive overseas cash hoard.
Since Apple was added to the Dow Jones Industrial Average in March, however, the stock has faced continuing selling pressure, as falls in the Dow required mutual fund managers to sell Apple shares. The Apple stock currently trade at about 15% less than at what they did when it joined the average.
Despite all this, a lot of people still like to play the company’s annual product announcement, scheduled for tomorrow. It will be available as a live stream, on Apple devices, meaning PC and Android users will be getting the news secondhand.
What Will Apple Announce?
The big announcement is expected to be an iPad Pro, an effort to create a replacement cycle for Apple’s popular tablet with up to 128 Gbytes of memory, a 13 inch screen, and a wireless keyboard that makes it a complete PC replacement, priced similarly to current MacBooks. What matters is whether third-party software companies follow-up with applications that take advantage of, and even require, this level of memory and screen capability. That won’t be known for some months.
But if you’re considering an investment in Apple stock – and I wouldn’t recommend you buy with less than a three-year time horizon – you will want to focus on Apple TV. It was originally sold as a set-top box for watching TV, and many of the rumors today focus on whether Apple will create a Netflix-like over-the-top programming service for it. There’s also a lot of talk about the Apple TV’s gaming capabilities, the idea being that it can be a console competitive with the Sony (NYSE:SNE) PlayStation or Microsoft (NASDAQ:MSFT) XBox.
Apple TV as Home Hub
But as an investor I’m far more interested in Apple TV’s becoming a smart home hub, starting with a Siri-activated voice search feature.
A “smart hub” would just start with entertainment. By integrating Apple TV with its Homekit software, Apple could be setting the $150 box up to be the center of its Internet of Things initiative, in which home security, home automation, and even medical applications plug-in to its software. Automating life, rather than just automating entertainment, remains the “holy grail” for all the big tech companies – Microsoft, Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Apple. The company that cracks the problem, and sells a solution to tens of millions of homeowners, could dominate technology for decades.
Should I Buy Apple Stock?
Is this it? The good news is that your investment in Apple stock today is not riding on that question. You can buy that hope without having to buy hype because Apple will certainly sell tens of millions of iPhone 6s units, Apple Watches, and iPads over the next three years.
But it’s that hope that remains behind my own investment in Apple stock. I personally began accumulating it back in 2013, ending with 200 shares post-split. I now have stock with a Price/Earnings multiple of 12.6, which is even lower when you factor in the company’s remaining cash, its ability to bring $1 of every $4 in sales to the net income line, $70 billion in operating cash flow during the June quarter alone, and a dividend with a yield of 1.9%, compared to the 1.47% yield on a U.S. five-year note.
With those numbers, I might even be buying some more before the market’s next speculative rise.