Is It Worth Buying Apple Stock?
March 19, 2019
This is one of the great success stories of the 21st century. Apple stock (symbol AAPL) came very close to bankruptcy in September 1997. But from that moment on, founder Steve Jobs once again took over the company's leadership to restart it on a solid foundation. What followed: reaching first place globally by market capitalization between 2012 and 2017. In 2018, it was overtaken by Microsoft.
After the global financial crisis of 2007-2009, Apple stock (AAPL) became one of the most popular stocks among institutional investors and individual investors. In a technology sector where profitability is rare, the brand with the apple logo managed to achieve it in a vigorous way. It has more than 250 billion dollars in cash and instruments that can be liquidated immediately.
Founded at the beginning of April 1976, Apple is reaching a critical moment in a business whose flagship products are becoming increasingly popular among Apple customers. The price of AAPL stock has plunged by almost 40% from October 2018 to the present. The slowdown in economic growth in China and the disappointing sales dynamics of iPhones and iPads are the causes of the decline in AAPL shares.
In this article, we will explain whether it is worth buying Apple stock. If the fundamentals justify it, you will see how to buy Apple stock CFDs using chart analysis or fundamental analysis by studying the financial balance sheet and valuation ratios.
Profitability from operating and net margins has started to flatten somewhat since 2012, but it still remains at a high level. It is worth noting that Apple designs its products itself, but does not manufacture them directly.
ROE (return on equity), meaning the profitability of shareholders' money, exploded over the same period, reaching a record level in 2018, because the company gained access to debt creation at attractive borrowing costs.
At this moment, Apple stock is recording significant profits and has managed to keep a series of indicators such as EPS (Earnings Per Share - earnings per Apple share) and P/E Ratio (Apple share price relative to earnings) on an upward trend since 2006, despite a period marked by some volatility in 2012. This is a positive aspect for creating value for shareholders and for its cash.
Next, let us also look at debt.
The debt-to-equity ratio may make you worried or even extremely worried. In reality, Apple stock (symbol AAPL) prefers to borrow in order to finance its activity at a low cost.
To reassure you, its ability to repay debt is not in question, with Apple stock having a net debt / EBITDA ratio of only 1.02. Within the standards of rating agencies, this level is extremely low, as they require non-financial companies not to exceed a level of 5.
Since 2012, Apple (symbol AAPL) has started paying dividends to shareholders and introduced a financial logic that Wall Street loves: the dividend increases every year. This is proof that Apple succeeds in creating value for shareholders.
There is still enough room for Apple to be even more generous with its shareholders. Indeed, the payout ratio is around 25%. At first glance, the dividend level granted is solid over the long term.
The price of Apple stock has had an exceptional market path since the lows of March 2009, recording historical highs that have been continuously exceeded.
The trend line could become a support point (in the 142-145 dollar price area) for medium-term or long-term growth potential. However, it would be wise to look simultaneously at the chart trend of Apple stock (symbol AAPL) and that of the S&P500, Nasdaq Composite and Dow Jones Industrial Average indices before any initiative. That is because Apple is, quite rightly, a company with major influence on Wall Street.
If the rising line of the global trend is broken, it would be better to avoid the temptation to enter a buy position.
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A Visionary Entrepreneur in the Person of Steve Jobs
Without the return of its founder, Steve Jobs, the company Apple (symbol AAPL) could have left this world. For this reason, he decided to favor the company's interest rather than that of shareholders, given that it was facing a financial sustainability problem. As proof, he was paid only one dollar per year (although it is necessary to mention the bonuses granted based on AAPL's financial performance). Steve Jobs understood that the notion of political correctness in a commercial strategy was no longer relevant. In any case, it is undeniable that Apple has proven its reputation by disrupting traditional codes in terms of business model and consumption. It had to offer what consumers already want or want to have. What was beautiful about him was his ability to convince consumers unfamiliar with technology that it was accessible to them. All of this with simple and refreshing arguments. As a result, the Apple brand created followers who gather online through forums and sites dedicated to AAPL. Thus, before his death, Steve Jobs's character and attitude were among the unseen arguments for buying Apple stock CFDs (symbol AAPL).Why Buy Apple Stock
If Apple stock CFDs returned to success during the 2000-2010 period, this was largely due to the emergence of the iPhone and iPad. These products revolutionized technological mobility to a significant degree. What differentiates them from the competition is that these products are authentic and valued by consumers. They have the particularity of being multifunctional despite their high prices. For example, you can do many things such as listen to music, watch videos and electronic books, play video games, browse the internet, and watch TV programs. In short, iPhones and iPads can spare you from making several other purchases. Another strong point of Apple that generates repeat use and customer loyalty is its service portfolio through iTunes for music and the App Store for free or paid applications. Do not be afraid of the words: prices are relatively lower compared with retail offers. Now that the iPhone and iPad have reached maturity and a high level of adoption, we will need to find other arguments for buying Apple stock CFDs on the stock market, given that the price of one Apple share has become highly dependent on the success of its products. China's economy and the dynamics of the services sector could provide a second boost to Apple stock price dynamics. However, in China, the manufacturer whose stock symbol is AAPL faces serious competition from local producers Xiaomi, Huawei and ZTE.Analysis of Apple Stock's Financial Situation
Profitability from operating and net margins has started to flatten somewhat since 2012, but it still remains at a high level. It is worth noting that Apple designs its products itself, but does not manufacture them directly.
ROE (return on equity), meaning the profitability of shareholders' money, exploded over the same period, reaching a record level in 2018, because the company gained access to debt creation at attractive borrowing costs.
At this moment, Apple stock is recording significant profits and has managed to keep a series of indicators such as EPS (Earnings Per Share - earnings per Apple share) and P/E Ratio (Apple share price relative to earnings) on an upward trend since 2006, despite a period marked by some volatility in 2012. This is a positive aspect for creating value for shareholders and for its cash.
Next, let us also look at debt.
The debt-to-equity ratio may make you worried or even extremely worried. In reality, Apple stock (symbol AAPL) prefers to borrow in order to finance its activity at a low cost.
To reassure you, its ability to repay debt is not in question, with Apple stock having a net debt / EBITDA ratio of only 1.02. Within the standards of rating agencies, this level is extremely low, as they require non-financial companies not to exceed a level of 5.
Since 2012, Apple (symbol AAPL) has started paying dividends to shareholders and introduced a financial logic that Wall Street loves: the dividend increases every year. This is proof that Apple succeeds in creating value for shareholders.
There is still enough room for Apple to be even more generous with its shareholders. Indeed, the payout ratio is around 25%. At first glance, the dividend level granted is solid over the long term.
Chart Analysis to Know When Apple Stock Can Be Bought
Conclusion - Can AAPL Stock Continue Its Rise?
Regarding fundamental analysis, Apple is a very high-quality company over the long term, with more than 250 billion dollars in cash and enviable profitability in the technology sector. In the event of certain negative cyclical or industry-related factors, it has reserves it can use. In addition, it has the freedom, meaning the financial independence, to bring other growth drivers to the forefront in order to continue creating value for shareholders. The company Apple published a warning regarding profit and revenue for the first quarter of 2019, citing the slowdown in economic growth in China. This shows you that a company does not only have safe growth cycles. The challenge of finding solutions as iPhone and iPad devices reach maturity will also remain, with the risk of becoming too dependent on those two products.Source: admiralmarkets.ro
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Risk warning: This article is for information and education only, reflects the situation as of its publication date and does not constitute investment advice, an offer or a recommendation to buy or sell any financial instrument. Trading leveraged instruments (Forex, CFDs) and crypto-assets carries a high risk of losing your capital. Past performance does not guarantee future results. Before investing, assess your objectives and risk tolerance and, if needed, consult a licensed adviser. Details: Disclaimer & Risk Warning.
Translated from the Romanian original with AI assistance.