A Forgettable Year For Apple Stock Spells Opportunity Ahead

  • Apple is in uncharted waters in terms of sales and profitability.
  • You can get Apple stock for just 12.3 times earnings, much lower than the market valuations.
  • A perfect stocking stuffer for Christmas, Apple stock is one to own.

For Apple (NASDAQ:AAPL) stockholders 2015 has been a year to forget.

For the company, not so much. While the Apple stock has gone nowhere, and an expected oil-related market downdraft on December 14 was expected to take it level for the year, the company itself has been firing on all cylinders.

AAPL stock chart

Source: Apple stock price chart by amigobulls.com

For fiscal 2015, which ended in September, Apple earned $53.4 billion on revenues of $233.7 billion. That means more than $1 in every $5 wound up on the bottom line. Earnings per share of $9.22 covered the dividend of $1.98 more than four times over, with room to spare. The company generated nearly $90 billion in operating cash flow, meaning you’re currently paying just 7 times cash flow for the company’s stock. Take out its $203 billion in cash and the operating business is selling for 8 times earnings.

These are uncharted waters. In terms of profits, they’re uncharted for any large company. In terms of revenues, uncharted for any tech company. In terms of market cap – even though it hasn’t really moved all year – uncharted for literally any company. Apple revenues are as big as Iraq, its market cap bigger than Sweden’s Gross Domestic Product.

The point is that Apple is big, really big. So a lot of people wonder if it can possibly get any bigger. They scour the news for evidence it’s peaking, like a report that it’s advertising the Apple 6s using full-screen pop-ups on its App store. Or that its popular iPad lacks a clear upgrade path -- a reason for a satisfied customer to buy another one, with more storage, in order to run new software.

As a yield stock, Apple is OK but not great. The current dividend of 52 cents/share yields 1.84%. Based on its Price/Earnings multiple, Apple is a laggard, selling for just 12.3 times earnings. IBM (NYSE:IBM), by contrast, sells at 9.3 times earnings, and Microsoft (NASDAQ:MSFT) is at 36.

Apple has become what General Electric (NYSE:GE) or AT&T (NYSE:T) used to be, the kind of a stock you can stick into a kid’s Christmas stocking (print your own stock certificate – they don’t do that anymore) and know you’re delivering something of value.

The Apple Watch is considered a “failure,” but it will add $8.4 billion to revenues this year. The MacBook Pro hasn’t had a refresh since 2012. A new battery case got bad reviews. All those sound like opportunities to me.

So why, then, should you buy Apple stock, right now? Because there is low risk and, potentially, high reward. The chances of its rising to $130/share are much greater than its falling to $100. If it goes to $100 buy with both hands, because its dividend is secure.

Apple is a stock you own.

Dana Blankenhorn Dana Blankenhorn   on Amigobulls :
Author's Disclosures & Disclaimers:
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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