“Apple (AAPL) had its best day in more than two years after the company reported quarterly earnings that were much better than analysts had expected. Expanding the shareholder capital return program echoes management’s confidence in stock’s valuation, reinforcing the multiple expansion narrative as well,” Nitin Gulati writes for Seekign Alpha. “By announcing a seven for one stock split, management is trying to shift the stock ownership toward less sophisticated individual investors and create more liquidity in the stock. In my opinion, the expansion of the capital return program combined with strong business fundamentals, increased investor participation and a growth catalyst (if announced) will form a feedback loop leading to a self-reinforcing “boom” phase in Apple stock again.”
“My fair value estimate for Apple hasn’t changed after the recent earnings release. Recent price action has led to the convergence of intrinsic value with the stock price. I think it’s right time to speculate on a long position in Apple. I continue to believe that above mentioned management actions and their consequences have marked the beginning of another bull run in Apple,” Gulati writes. “I continue to stay long in Apple through options markets. Having said that, investors should continue to look out for the build up of risks as expectations and reality divergences reach an extreme.”
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