With Apple’s stock down 10% in August, it’s time to buy shares in the world’s most valuable company, maker of Macs, iPad, iPhones, Apple Watches, and purveyor of Apple TV+, Apple Card, Apple Arcade, iCloud storage, AppleCare, and much more.
Daniel Sparks for The Motley Fool:
While it always makes sense to have some cash, cash equivalents, and lower-risk investments in a portfolio, this may not be the time to double down on cash, despite the attractive yields in T-bills. Indeed, August’s decline has already surfaced some great opportunities. Take Apple stock, for instance. The iPhone maker’s shares have pulled back 10%…
Flipping the price-to-earnings metric upside down, you’ll get earnings yield. Doing this quickly puts into perspective why stocks generally outperform T-bills over the long haul. Apple’s earnings yield, which can be found by taking the company’s trailing-12-month earnings per share of $5.98 divided by the current stock price of $174.49, is 3.4%. While this earnings yield is lower than the 5%-plus rates available in treasuries, there’s a critical difference in this earnings yield relative to T-bill yields: Apple’s business is a going concern, so it will generate earnings for decades. In addition, it’s a going concern likely to grow over time…
On average, analysts expect Apple’s earnings per share in just four years to be about 50% higher than they are today. This is the power of compounding.
MacDailyNews Take: Owning and accumulating Apple stock has been a surefire way to turn relatively nothing into something rather significant for many, many years now. Sure, it’s fun – and can make you a bit more if done well – to try to time your buying on the dips, but a regular schedule of simply buying and adding to a growing stake of AAPL shares can clearly benefit investors as well.
Please help support MacDailyNews. Click or tap here to support our independent tech blog. Thank you!
Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.
I backed up my truck when it was in the 120s and 130s. Right now my truck is waiting to be refueled. 🙂
For sure, AAPL with its established products and services will continue generating revenue for many years to come. And I definitely benefited from investing in the stock over the past 15 years. But it’s always good to look at growth prospects before investing into any company. Doing this with Apple at the moment yields pretty disappointing results.
Unlike in the decade of the iPod, the decade of the iPhone, and the decade of Apple Watch, there are no great growth drivers on the near-term horizon. Services keep chugging along, albeit with ever slowing growth, and Apple Watch, for as long as Apple keeps adding sensors, keeps growing, thanks to the huge iPhone base. But that, too, will slow as that base is saturated in the next few years. But there’s really nothing else that will set AAPL shares on fire in the next 1-3 years.
Some might reflexively respond with “how about Vision Pro?” I’d say that Vision Pro will not meaningfully add to AAPL’s bottom line until it becomes a mass market product, instead of the niche market it is relegated to at a $3500 price point and ugly as sin to wear. In 3-5 years, Apple Glass will become that mass market success.
So, while I’m bullish on AAPL’s future, but investments in it for the next 12-24 months seems like dead money. CDs (currently yielding 5.5%) are a safer, yet likely more profitable investment in this uncertain economic time.