A Quick Note on Apple’s Future


Well, it seems like a good time to revisit Apple (AAPL). Analysts decided to hate it yesterday because it’s not a hyper-growth stock anymore. They’re missing that it’s a great value stock and is moving into three huge growth markets over the next decade.

Apple reported yesterday and the numbers were okay. The problem is that most investors want Apple to be a growth company again. That’s going to be tough given that the smart phone market is mature and saturated.

One analyst on the conference call chided Tim Cook for not doing better despite the recent problems by Samsung’s Note. Cook at one point replied along the lines of “it’s tough to gauge demand when you’re selling everything you can make.”

Funny thing is that Apple is priced like a value stock. It’s P/E is only about 14 and it is still sitting on a massive hoard of cash. So, comparing Apple to a billion dollar growth stock makes little sense. It’s better to compare to AT&T and GE. If compared that way, then Apple is a clear winner, as Apple’s numbers are better than virtually any other value dividend stock.

So, that’s the universe Apple belongs in: dividend equity.

That’s not to say that they won’t have blow off the doors growth again someday. They are moving into three huge markets: payments, cars and homes.

They are further along on Apple Pay and given what a pain in the butt it is to use the chip readers with a credit card, I think a lot of people are going to have their kids teach them how to use Apple Pay soon.

The car industry is huge and Apple just finished their crash (pun intended) course on cars. As you might have read, Apple for the past few years has been working on a secret car project. Everybody thought they were going to build a car. I said “no” they’re learning how to provide services to car companies. They recently fired a lot of people on that team who were superfluous. They are left with a team that can implement deals with GM, F and car companies around the world. Expect deals to start dropping next year for Apple systems in cars.

Finally, the smart home is coming in the 2020s. We know that there is a shortage of new homes. I am starting to like home builders for after the next recession as there will certainly be stimulus when that recession happens. Apple will benefit form that too as they will be one of the smart home leaders (along with Alphabet/Google).

Bottom line, if you don’t own Apple, wait for the pullback to be complete somewhere under $100/share. If you own Apple and it’s not a huge position, hold on, and prepare to add to it under $100/share.