Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) have been engaged in a tough fight for long. The Cupertino-based company spent a lot of its $40 billion war chest to bring down Google’s Android. However, Apple has done well despite stiff competition. Its results are now better than Google and the company is gaining traction with its iPhones. Also, with a strong quarterly dividend and a share buyback in the billions, Apple stock is a better buy than Google. Let us take a look at whether Apple can generate further solid results going forward.
An Apple That Keeps Growing
Apple’s revenue has seen a tremendous increase on an annual basis, gaining more than 41% in the last five years. Apple’s success story and market capturing ability isn’t showing any signs of fading away. The company has a strong cash position with $100 billion in the bank.
- Warning! GuruFocus has detected 5 Warning Signs with AAPL. Click here to check it out.
- AAPL 15-Year Financial Data
- The intrinsic value of AAPL
- Peter Lynch Chart of AAPL
Apple’s success can be attributed by record sales of more than 50 million units of the iPhone in the holiday quarter. The newest iPad’s record sales were the cherry on the cake for the company. The highly anticipated iPhone 6 is still in the pipeline and the high anticipation of the device is a great sign for Apple.
As far as opportunity to sell its products is concerned, there is no dearth of it. The booming market for smartphones in China, where users are now moving to 3G devices, is one big opportunity for Apple. So, Apple will find more takers for its iPhones as a result of Chinese smartphone growth. In addition, the company is of the opinion is that the growing complexity of connectivity solutions will lead to a bump in its addressable market.
So, once the migration to 4G devices in China begins, Apple will have an even bigger playing field at its disposal. Presently, telecom major China Mobile is the one looking to roll out LTE in the nation. It began testing its TD-LTE network earlier this year in Guangzhou and Shenzen and is expected to officially roll out its network for public use next month. Once China Mobile’s LTE network is deployed, we should see more devices supporting the technology and Apple's addressable market should increase further, and probably at higher margins.
Mountain of Cash
Apple has a mountain of cash. The company’s financials are strong and are expected to be better than before in the future. As Apple is expected to generate about $60 billion in cash this year, the company is confident of funding its investments and innovations. This will certainly support Apple, considering that it plans to give away around $45 billion over a period of three years in buybacks and dividends. So, spending on dividend and buyback initiatives isn’t a problem for Apple.
Why You Can Still Have a Bite
Comparing Apple’s ratios with Google, Apple lags behind Google with trailing P/E of 16.89 while Google has a trailing P/E of 21.37. If we look at Apple’s forward P/E of 12.27, it is evident that its forward P/E is still lower than its trailing P/E.
Apple still has better prospects. Sound fundamentals, fantastic products, solid financial performance and dividends are qualities that one looks for in a stock. The presence of all these in Apple makes it a stock worth including in a portfolio.