Should Apple (AAPL) Stock Be In Your Portfolio Now?



Apple’s (AAPL) stock could experience a huge volume of trading activity in the next few weeks, as the company officially updates its product lineups in all of its stores. If you haven’t tuned in for AAPL’s keynote, a quick summary of what was outlined for the company’s near future can be seen here.

AAPL’s stock has also recently hit the $100/share benchmark, but what was surprising was how quickly the price dropped after the initial excitement at the time of the announcement of the Apple Watch during the keynote. It was obvious almost everyone was a trader, not an investor.

So with that said, is there any chance to see AAPL hitting the $103+/share all time high anytime soon? We will examine the prospects for AAPL to see if that could be achieved within the near future when the iPhone 6/6 Plus debut, and when Apple Pay starts serving customers in stores around the country.

Prospects for Apple Watch and Apple Pay

Apple Watch is going to be a very exciting gadget, that’s for sure. The way AAPL has marketed itself ever since what I like to call the “Apple boom,” hype over any new Apple product, distinguishes and sets Apple apart from other technology firms. Samsung and LG have already debuted their own smart watches, however, we are hearing very little of them, and it appears as though these two giant companies are amateurs at marketing when compared to Apple.

On the other hand, AAPL is the master when it comes to hyping up its new lineup of products. We can all look back, reflect, and remember how skeptical the public was of the iPad, and how many thought it was just a “bigger iPhone,” and that people were not so foolish to fall for the marketing gimmicks, however let’s face it. We were wrong, the iPad went on to be a bestseller, and indeed, a moneymaker for AAPL as millions of iPad devices were sold, and many generations and upgrades were released ever since. Apple Watch may very well follow in the iPad’s footsteps, and take investors by surprise as well.

As for Apple Pay, the question will be whether merchants and consumers warm up to the system or not. If they do, Apple is looking for a huge increase in iPhone 6/6 Plus, and Apple Watch sales, as they are the only devices that can utilize Apple Pay. Many merchants are anxious because Apple has solved the issuing bank side, but not the merchant side.

NFC payments, as of now, are being used by less than 10% of merchants, and the problem is that that technology had trouble winning merchants, and the cost of installing and maintaining NFC (near field communication) scanners in many stores is too high for some merchants, in particular, smaller ones, who would find that $300 to $500 per NFC scanner is a costly tag.

It is a costly bet for Apple too, especially since software and innovation giant, Google (GOOGL), had their very own Google Wallet fail in 2011 when it relied on NFC payments technology, but who knows, this is Apple, and maybe GOOGL is not a very good measure to go by given that another few years have passed.

Apple’s Financials

AAPL’s financials have been doing great for quite some time, and AAPL has its popularity among consumers, investors, as well as earnings estimate beats to thank for its life and well being. It is important to note that AAPL pays around $0.47/share in dividends to its shareholders each quarter.

As of (9/30/2013), AAPL managed to generate sales worth $170,910 million, a gross profit worth $64,304 million, and a positive net income of $37,037 million. AAPL maintained a positive diluted net EPS of $5.68/share last year.

The Zacks consensus Estimate Trend shows, for the current year (9/2014), that AAPL will have $6.33/share in EPS. AAPL also seems to be able to surprise EPS estimates on a consistent basis, with a 6.51% surprise average.

Analysts have also consistently revised and raised their EPS estimates for the current year from $6.30/share to $6.31/share 90 days ago. AAPL is currently ranked a Zacks Rank #3 (Hold), and the stock has an Earnings ESP of 1.56%, and an EPS surprise last quarter of 4.92%.

Bottom Line: Should AAPL Be in Your Portfolio?

As of late, Apple has been enjoying positive social sentiment. The stock currently maintains a moderately bullish social sentiment and around 83.23% bullish sentiments on StockTwits.

AAPL currently maintains a Zacks Rank #3 (Hold), as there is likely to be a better buying opportunity if there is a sub $100 pullback for the stock, prior to the official lineup refresh in AAPL stores. AAPL’s research and development expenditure is lower than Microsoft’s (MSFT), however, it maintains a lower forward P/E ratio (15.96) than MSFT’s 17.20 forward P/E ratio, indicating that of the two behemoth companies, AAPL’s stock is currently the winner for value investors.

Many analysts have revised their EPS estimates, increasing them for the next quarter, current year, and next year.  It is also worthwhile to note that AAPL maintains a lower PEG ratio (1.27) than the industry average of 2.63, indicating AAPL’s stock is undervalued relative to other stocks in the same industry.

Perhaps most importantly, AAPL has surprised positively over the past four quarters, yielding an average EPS surprise of 6.51%. Given this, AAPL is more than likely a safe bet for those who want to invest in the company for the long term.
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