Apple: Buy on the Pullback
10/05/2017 6:00 am EST
Apple (AAPL) is the world's leading personal technology company; virtually every home in North America now has at least one Apple product, asserts Glenn Rogers, contributing editor to Internet Wealth Builder.
I recommend this stock in September 2014 when it was trading at $100.96 and reiterated it as a hold in February 2015. The stock pulled back following the latest product release.
Third-quarter 2017 results (to July 1) were okay but not exciting. Revenue was up 7% to $45.4 billion while earnings per share increased 17% to $1.67, fully diluted.
The big news was the company's September launch of two new iPhones, iPhone 8 and the very expensive iPhone X, and a new iteration of the Apple watch, dubbed series 3.
Usually fans and bloggers pick apart the new offerings and the stock sells off after the unveiling. For example, they have found a glitch in the series 3 watches in regards to connectivity.
The company will fix this issue with a software upgrade within a few weeks. Reviews have been tepid on the iPhone 8 but the iPhone X will likely be a big seller, despite the big price tax, with a nice margin boost for the company.
Apple needs to be evaluated as a luxury goods business as opposed to a gadget business and that's why it ends up trading at a premium to its peers.
The company is likely to benefit from the new tax cut program that will likely make its way through Congress, even if nothing else does. On the other hand, the Europeans are trying to figure out how to levy more taxes on Apple and its peers.
Action now: Buy. There was a pull back after the recent new product announcement, which is typical after these events as investors try to assess their profit potential. Take advantage of it. The company is loaded with cash and has a very loyal fan base. Betting against it has not worked. My new target is $170.