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dcg014 (< 20)

Will Apple (AAPL) Continue to Soar?



April 24, 2014 – Comments (1) | RELATED TICKERS: AAPL , ^DJI

Last night after Apple’s earnings call ended and the stock re-opened shares jumped over 8% in nearly 10 minutes.  

Why? Several reasons: iPhone sales beat analyst estimates, top and bottom line handily beat analyst estimates, a nice dividend increase, adding $30 billion to the buy-back plan, and a 7-1 stock split effective June 2nd.  

While all these things are nice in the short-term we Fools always have our eye on the long play. 

Here are some things I am looking at that give me a good indicator of where Apple is going to be in the long-term: 

Apple is going to triple the number of brick-and-mortar Apple Stores over the next two years.  

Apple has the cash to build each of these out of gold if they so choose, and they just may. With an eye on places like China, Turkey, and Brazil a premium brand needs a premium appearance. All (somewhat) kidding aside this could be a big move in these emerging markets and could help Apple solidify a presence overseas. Apple will also have Angela Ahrendts (former Burberry CEO) to oversee this expansion as the new head of retail operations. 

Apple may make its way onto the Dow Jones Industrial Average.  

This is more of a nicety than an actual value booster (some even argue it may have the opposite effect). Apple’s possible addition is because of the impending 7-1 split. The share price is at a more palatable level for the ^DJI and would only account for about 3% of the average. Tech stocks have largely been unaffected by their inclusion into this “hall of fame.” Microsoft was added in 1999 and has mostly met with its performance metrics since then. Intel, on the other hand, has seen its ups and downs. Neither are direct correlations to how Apple will perform if they are added, but it would likely be a mutually beneficial move. Apple and Google have been two of the most notable absences from the Dow, and Apple’s potential addition could give the average some 21st century cred. Apple, in turn, would become a certified blue-chip stock and would gain inclusion on many Dow related ETFs. 

“One more thing.”  

Tim Cook has been dropping hints for quarters that Apple has some major products in development. Outside the normal yearly replacement cycle Apple may have a few tricks up its sleeve. The long rumored “iWatch” and “Apple HDTV” (not its current product, Apple TV)  may be in the pipeline and set to launch anytime. This is unlikely, though. If the “Apple HDTV” is real it will likely not be a full television set (as many have speculated), but a feature added it its existing products. The “iWatch” could have potential in an emerging wearables market, but the lack of regular “leaks” from the supply chain make it seem as though it is still in development. The next big thing from Apple is could likely something we have not heard or thought of yet. It could be a key new feature for the iPhone or it could be a new product that consumers don’t realize they want until they see it. With the amount of talent at Apple marginally improving the status quo will never be enough. At this point everything in regards to a new product or feature is pure speculation and has no added value to the current stock price.  

Financial Stability 

Apple’s key metrics are looking better than ever, even after a nice jump after earnings. Apple is still beating the tech industry in many key areas (P/E, Price to Free Cash Flow, Net Profit Margin, EBITD Margin) and has one of the largest cash reserves in the world. Even if Apple were to record a bad quarter in the near future this stock would still be relatively cheap. Additionally the volatility metrics (Beta, Short Ratio) do not appear like they will be a factor anytime soon. 

Whether you are a fan of Apple products or not, one must admit that the stock continues to provoke the attention of nearly the entire industry. And it does so with just cause.

1 Comments – Post Your Own

#1) On April 24, 2014 at 3:43 PM, dcg014 (< 20) wrote:

Correction: Apple will triple its retail stores in Greater China only. Going from 13 stores to 39 stores in the next two years.

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