4 Reasons To Buy Apple Now
TM is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) has been on quite a journey over the past couple of years. As the chart below shows, the stock had an incredibly 2012 but has slipped since then.
Even though Apple has slipped from its highs of 2012, I still think it is one of the best investment opportunities around. Below are 4 reasons why investors should consider adding Apple to their investment portfolios.
1) Financial Position
Apple is a leading innovator of new products and has typically found a way to astound even the most optimistic of analysts. Over the past 5 years, Apple has grown at an annual rate of 65%. Additionally, with the recent sell-off, Apple's 2013 P/E ratio has fallen to 11.3. This is much lower than Google (NASDAQ: GOOG), which has a PE ratio of 22.1. Although Google's Android has captured over 60% of the smartphone market, Apple still has a much more compelling valuation.
Apple also has roughly $130 cash per share available. This is in part why some investors were surprised that a special cash dividend wasn't paid towards the end of 2012, in light of the possible tax hikes that are forthcoming. Nonetheless, the company does have plenty of cash on hand which can be used for future technological developments that the company is constantly focused on.
2) Future Revenue Opportunities
Apple's products are without question extremely high-quality and durable. It makes a fantastic line of desktop and laptop computers, a luxury phone, several tablet devices, and a lot of musical products. And while the company excels in these areas, analysts are hoping the company expands into a few other areas. Those areas include:
- Smart TV Software: Essentially this would be a tablet on a wall with full access to controls and channels. It would be activated.
- Cheaper iPhone: There are many consumers across the world who would like to own an iPhone, but unfortunately they simply don't make enough to afford the high price tag. Apple may want to consider entering this market and although it will reduce profit margins, it should increase revenue.
- A mobile payments system
These growth opportunities may help push Apple into its next growth phase. With all of the innovation and power behind the company, the above areas should be fairly easy for Apple to penetrate.
3) Education Market
Recently, Apple has really taken advantage of being able to sell its products to the education industry.
According to a recent national survey, access to mobile technology in the classroom has more than tripled among high schools students in the past three years -- and even more interesting, parents say they are more likely to purchase a mobile technology device for their child if it's for classroom use.
Use of tablets and smartphones by K-12 students has hit 50%, according to an analysis released in October, 2012 at the Wireless EdTECH conference by Blackboard and Project Tomorrow. The report, "Learning in the 21st Century: Taking it Mobile!" found 50% of high schoolers and 40% of middle schoolers use smartphones or tablets on a regular basis. In November, more than 500 educators attended the iPad Summit hosted by Ed Tech Teacher at Harvard Medical School.
Popularity of iPad with students and instructors helped Apple break its own education market sales records last year. "Clearly, a significant portion of iPad sales represented an expansion of the market," Charlie Wolf with Needham & Company said. "But in view of the fact that Mac sales held steady at around 520,000 units but overall PC sales declined by 265,000 units from 1.90 million to 1.64 million units, we believe the inescapable conclusion is that the iPad is beginning to cannibalize a material portion of PC sales in this market."
4) Competition Advantage
Apple does face stiff competition from Google and Microsoft (NASDAQ: MSFT), but I believe Apple is poised to outshine both of them. With Apple's recent sell off, its valuation has become much more appetizing than that of its competitors. Currently, Apple's PE ratio sits at 11.3 while Google is at 22.1. Additionally, although Google's Android has captured over 60% of the smart phone market, Apple focuses on the higher profit margin areas and has tried to stay focused on the luxury market. Apple also appears to be in a position to benefit more from growth in China than does Google.
Microsoft is attempting to compete in the tablet market with its new Surface tablet. Microsoft has an uphill battle if it wants to catch Apple. First, the Surface will carry a steep price tag of $649 that is significantly higher than Apple's iPad and iPad mini. The Surface is also fairly unproven while Apple's iPad is regarded by almost all as the best tablet product on the market. Additionally, Microsoft doesn't have the product depth that Apple does. While Microsoft is known for their operating systems and now their tablet device, Apple is known for their computers, their music players, their tablets, their phones, and potentially many other future streams of income as described above. Apple certainly appears to have the edge over its competitors.
Apple has certainly gone through a rough stretch over the last couple of weeks. But when you factor in the run that the stock had in 2012, it was bound to cool off. The 4 reasons laid out above should help to reinforce why Apple is trading where it's at, and why it should head higher in the future.
TMM1982 has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!