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What's wrong with Apple Inc stock AAPL

 

 

October 26, 2016

 

So the Apple Inc (Ticker: AAPL) just released the quarterly financial yesterday after the market closed, even though the number is in line with the analyst estimates, the stock tanked over 2% after market trading, continuing today to over $3 down, or 2.6%.  You might be asking yourself what the heck is going on?

 

Apple was founded in a garage in the home of Steve Jobs at Los Altos, California in 1976.  Since then it revolutionized multiple industries including the personal computer industry, the music industry, the publishing industry, and last but not least, the phone industry.  The market cap has grown to over $600 Billion as of October 2016.  However the company has went through its fair shares of ups and down in the business world.  Most notably was the decline of the company in the period from 1991-97 after the firing of Steve Jobs.  After Steve was hired back as CEO in 1997, he refocused the mission of the company and set a vision that has blossomed in the almost last 20 years.  Up till his death in 2011, the company became the most profitable company in the world after a string of commercial successes including the iPod, itunes, iPad, iphone, and Apple Watch.  Apple store is the most profitable physical store in the world, even more profitable than Tiffany & Co. (Ticker: TIF).  Tim Cook, the now CEO has tried to continue Steve’s vision for the company.  

 

(source: Finance.yahoo.com)

As you can see, there was a big fall off in terms of the stock price around 2012 and 2013 after Steve’s death.  Then Iphone 4S exploded into the market and made people realized just how valuable Apple Inc is.  Now the stock is around $115/share, still less than the all time high of around $132/share reached around May of 2015.  

 

(Annual)

(Quarterly)

Let’s look at the numbers

 

Market Cap: $623B

Trailing P/E:13.48

Forward P/E:11.45

Profit Margin:21.7%

Revenue:220.29B

Quarterly growth:-14.6%

Gross Profit:93.63B

Current Ratio:1.31

Total Debt/Equity:62.12

 

We like what we seeing here.  All the number seems to be pretty good except the negative quarterly growth.  Let’s face it, considering it's market cap, it’s going to be harder and harder for Apple Inc to outdo itself every quarter, especially in the technology business and many things could affect from one quarter to next.  However with a current P/E of around 13, there's room for safety in AAPL stock stock in case something turns south.  Apple came out with a new line of products including iPhone 7 and laptops, these new products should help them especially in the next quarter, the holiday season.  Apple has also started to venture into Apple TV and artificial intelligence including self driving car.  Critics have been criticizing the softer sales in China and the Apple Watch, desktop computers not up to par.  One of the reasons for the steady but not growing sales in iMACs and laptops might be apple’s products are just so durable that the they do not need to be changed every few years such as Microsoft (Ticker:MSFT) products.   I am sitting here typing on a Mac Pro that I bought over four years ago, it still performs wonderfully, just like the first day I bought it.  I might be a little biased in judging this company, but their number speak for itself. Massive revenue and cash flow, manageable/non existing debt (considering their cash reserve).  Also Apple has built an eco system that included from software, services (iCloud, iTune, etc), to hardware that once someone converted from Google (Ticker: GOOG) or Microsoft (Ticker: MSFT), it is usually very hard to get out of because everything just works so well.

Apple Inc is has done very well over the last two decades at retain its current customers by making good products and keep them happy and gaining new customers in the process.  In the Oracle of Omaha, Warren Buffet’s word, moat.  So far Apple has built a very nice moat around itself. Therefore we highly recommend this stock at this price point for long term investment.    Again please do your own research when you are making any investment.  We also recommend you to look closely at the quarterly and annual financial statements yourself before you make any investments.  Happy Investing!

 

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