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Apple: Making a Comeback
06/02/2014 7:00 am EST
While stock splits don't change the value of a company, they can make shares more appealing to the average investor, notes Ian Wyatt, editor of $100k Portfolio.
Many investors don't like buying high priced stocks, and the lofty share price of Apple (AAPL) may have kept some investors away. Apple shares are more digestible to an individual investor with a limited amount of money at $84 per share than at $590 per share.
Meanwhile, the two biggest complaints about Apple over the last couple years have been that the company isn't coming out with new and innovative products, and that it doesn't share enough of its massive cash hoard with its investors.
Some recent developments have quieted those concerns, as Apple has unlocked a large portion of its $150 billion cash stockpile , boosting its dividend by 8% and announcing a $30 billion stock buyback.
Perhaps the biggest qualm investors have had with Apple lately, however, is the absence of "new" products. It appears that's about to change.
The company spent $4.5 billion in R&D in 2013—three times the amount it spent in the year prior to its first iPad launch. We don't know when it will happen or what it will be. But Apple clearly has something big cooking.
Meanwhile, Apple is already a bargain. It trades at just 12.2 times next year's estimates. It's even cheaper than that when you back out the $48 in cash per share the company still has in its coffers.
After peaking at $700 in late 2012, Apple has been on the defensive. But the stock is finally making a comeback.
Apple shares have risen 51% since dipping below last June. I think it's the beginning of another long trend of solid performance from the world's largest company.
Every step of the way, analysts have been doubting Apple. The company's most innovative and best days are behind it, some have claimed. We've disagreed with that pessimistic outlook.
We've been recommending Apple stock for the last year and encouraging investors to be patient with the tech giant. Even after the recent jump, we like the stock and recommend buying it today.
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