Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

100 Billion Reasons To Buy Apple Stock

Currencies / Tech Stocks Jan 30, 2012 - 07:31 AM GMT

By: Money_Morning

Currencies

Best Financial Markets Analysis ArticleJack Barnes writes: Apple Inc. (NASDAQ: AAPL) is one of the world's largest companies based on market capitalization.

Cupertino, CA-based Apple just released one of the best earnings reports in the history of capitalism.

In short, they crushed it-sending Apple stock to a fresh 52-week high.


Take a look:

In a record setting first quarter, Apple sold an astounding 73 million devices, including:

•5.2 million Macs.

•15.4 million iPods.

•37 million iPhones.

•And 15.4 million iPads.
Keep in mind that's just devices. Apple also takes a 30% cut of all the music, apps, movies and books sold in the online iTunes Store, and its retail operation is a gem within itself.

All told, it's a remarkable growth story - and one that's far from over.

But that is only part of why you should buy Apple stock. Its balance sheet boasts 100 billion more reasons showing the company is a solid "Buy."

Ironically, Apple has so much cash its stock could actually be considered cheap.

Apple reported $97.6 billion in cash, but given the rate the company was selling products in the fourth quarter, that figure is surely higher now.

Today, Apple's cash-on-hand has to be around $100 billion. This mounting pile of cash has been the source of much speculation in recent years, and the issue was again raised by analysts last week during the earnings conference call.

Judging from Chief Financial Officer Peter Oppenheimer's response, it was clear the company has plans for it.

According to Oppenheimer:

"We're examining all uses of our cash balance, what we might do in the supply chain, what we can do from an acquisition perspective and otherwise. Since I don't have any perspective to share with you today, specifically on dividends or buybacks, other than again, we are actively discussing the cash balance."
It's my expectation Apple will surprise the market by deploying its cash hoard in a mergers and acquisitions (M&A) spree that helps reform its product development.

At this point, the cash is pouring in too fast to pay out dividends and buy back stock. They need a strategy to buy technology, like ARM Holdings PLC (Nasdaq: ARMH), which Apple helped found in 1990 and now sources chips from.

Apple has a track record of making small strategic acquisitions, such as chip designer P.A. Semiconductor in 2008 (which allowed Apple to design the A4 and A5 chips used in the iPhone and iPad), and music service Lala in 2009, which provided technology for iCloud.

So what Apple decides to do with its cash in the near term will ultimately determine what impact the company will have on our lifestyle in the future.

That's why I believe it's time to buy Apple Inc. (**) - as it works to deploy its cash and continue enhancing the user experience for its customers.

Apple Stock is a "Buy"
When you get down to it, all you need to know is that Apple:

•Is debt free;
•Has about $100 billion in cash;
•Is growing demand at a rate of 100%;
•And will be putting its cash to work in the future.
Apple is unique among companies in that it could be rated AAA if it wanted to issue debt. Logically, though, why would it? It's built up the largest cash position in history.

In fact, it's the sheer size of the cash hoard that makes this company so interesting. Apple has enough money to change entire industries just by its business demands.

Today, Apple has grown into the largest consumer of chips in the world. Their lineup of tablets, computers, and cell phones has grown to such a degree that the mobile computing trend that Apple launched and dominates is now the driver of chip designs for the future.

This is where I believe Apple will be putting its cash to work. Apple doesn't need to buy back shares or pay a dividend if it has a better use for that cash.

I expect to see Apple purchase chip designers and invest in its capacity to manage its product-line sourcing. I think its next major product will see its early product cycle kept in-house.

Meanwhile, the growth rates at Apple are simply staggering. iPad revenue increased by 100% year-over-year in the fourth quarter alone, while iPhone revenue increased by 133% year-over-year.

You can expect this to continue as Apple cranks out more unique and compelling products in the years ahead.

Action to Take: Buy Apple Inc. (NASDAQ: AAPL) (**)

Apple has the capacity to change the lifestyle of its consumers. While Steve Jobs is no longer around, his impact will be felt for years to come.

In a world of uncertain economic outcomes, Apple rises above the storm as a safe location to park capital. While it currently does not pay a dividend, that could change soon. Even if it doesn't, the rate at which the company is building up its cash hoard allows an investor a comfortable night's sleep. Apple is about as safe a company as you can invest in.

Let's pick up 50% of our Apple shares in the near future, with the rest entered as good-"til-cancelled around the breakout area of the latest earnings report. This should be retested at some point and will give a patient investor a good location to add to their long-term holdings.

(**) Special Note of Disclosure: Jack Barnes has no interest in Apple Inc. (NASDAQ: AAPL).

About the Writer: Columnist Jack Barnes started his career at Franklin Templeton in 1997. He started out in the company's fund-information department - just as the Asian contagion infected the Asian tiger countries.

Barnes launched his own shop, RIA, in 2003, just as the second Gulf War was breaking out. In early 2006, after logging a one-year return of nearly 83%, Forbes named Barnes the top stock picker in its "Armchair Investors Who Beat the Pros" competition. His two audited hedge funds generated double-digit returns in 2008.

Barnes retired to the beach in the summer of 2009, and continues to write from there. He's now the author of the popular blog, "Confessions of a Macro Contrarian," and his "Buy, Sell or Hold" column appears in Money Morning on Mondays. In his BSH column last week, Barnes analyzed Petroleo Brasileiro SA (NYSE ADR: PBR).

Source http://moneymorning.com/2012/01/30/buy-sell-or-hold-100-billion-reasons-to-buy-apple-stock/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive



© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in