There is hardly any doubt that Apple (AAPL, Financial) is one of the most favorite stocks on Wall Street, and the recent product launches by the company have triggered its brand popularity and, also, the stock price. The crown jewel of the West, Apple has climbed approximately 23 percent since the 7-for-1 split that it executed in early June. Riding on highly consistent performance and robust future outlook, Apple is expected to hit approximately $8.5 in earnings next fiscal (that is a growth of around 32 percent over 2014 diluted EPS of $6.45 per share). Currently trading at a forward multiple that is shy of 14x, the stock makes a strong case for induction in your portfolio. Let us examine the prospects.
A look at the past
In the fourth quarter, Apple reported robust revenue growth on the back of great product launches during the entire year. The company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion, or $1.42 per diluted share. These results compare to revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 37 percent in the year-ago quarter. International sales accounted for 60 percent of the quarter’s revenue. Not surprising, the iPhone sales took the limelight as the company moved 39.2 million smartphones –Â up from 33.8 million for the same quarter last year.
iPhone sales grew across both developed and emerging markets. Unit sales in the U.S. grew 17% year over year, and in Western Europe they were up 20%. We saw even stronger growth in Latin America and the Middle East with sales up more than 50% and in Central and Eastern Europe where sales more than doubled. Though the holiday sales data is not completely out yet, but it is not tough to decipher that iPhone sales as well as the sale of other Mac products will help Apple achieve the impressive guidance it has given for the first quarter of fiscal 2015. Though this latest CNBC article warns of a slightly lackluster holiday sales for Apple yet as the article points out in the later part, such a forecast comes with certain highly plausible caveats.
Good times ahead
Again, the certainty of holiday sales will be only clear once Apple announces its first-quarter results but nonetheless, investors can be confident about a strong lineup of products that the company boasts of. There might be some deviation from the Street expectations but for sure, Apple will have a highly successful season because of this robust product portfolio. Another reason that I am highly bullish on Apple’s holiday sales is because of its wide and strong presence across most of the geographically significant regions. Consider this, Apple now accounts for 39.5% of all British smartphone sales, jumping 10.4% since the launch of the iPhone 6, its highest level ever. Most of these sales were driven by loyal Apple users. Some 86% of British buyers upgraded from an older iPhone model, only 5% switched across from Samsung.
The best part about Apple is its cheap valuation. At a price of around $115, the stock is priced at around 14 x forward multiple. And, here we are talking of a company that has a lion share of smartphone markets across the globe. Also, it is a no brainer to figure out that Apple is also uniquely positioned to take leverage from the Internet of Things (IoT) trend. As we know, the Apple watch is set to go on sale in spring and though its full capabilities aren’t yet known, the watch has already grabbed a tonne of publicity simply by being announced – eclipsing other smartwatches announced earlier this year from companies including Samsung (SSNLF, Financial),LG and Motorola (MSI, Financial).
Takeaway
It does not take complex calculations to figure out if Apple is a justified buy because of the company’s robust fundamentals. Unlike companies like Google (GOOG, Financial) and Facebook (FB, Financial), Apple has a steady stream of revenues flowing from its innovative and optimally designed products. I agree that Apple experienced a dry innovation spell in the last year but now, it is back on the road, and this is good news for investors. As of now, Apple is a sturdy pick in the tech sector, which is poised to grow in coming quarters.
