AAPL Stock: Should Record-High Earnings Be Enough to Be Bullish on Apple Inc. in 2016?

AAPL StockWhat’s Next for Apple Stock

If you ask investors what their dream trade is, most would probably mention Apple Inc. (NASDAQ:AAPL). Apple stock grew by 6,414% between 2003 and 2015, making it one of the most successful trades of all time.

Saying that a company could be “the next Apple” or that it has “the next iPhone” in its product line-up is the biggest compliment any analyst can give. It has become the ultimate symbol of success, a marker for other companies to try to achieve.

The company’s fundamentals are simply staggering. Apple cranked out $75.9 billion in revenue last quarter and is currently sitting on more than $216.0 billion in cold, hard cash. The company has enough money to buy back stock, pay a juicy dividend, invest in the future, and still have billions in the bank. (Source: “Apple Inc. – Income Statement – Quarterly Data,” Google Finance web site, last accessed March 28, 2016.)

Despite those signs of exceptionalism, the market still battered Apple stock in the last 12 months, driving it down more than 16.4%. What’s going on here? Is Apple stock overvalued? Has the company’s outlook suffered an unexpected blow?

Oddly enough, it hasn’t. The company delivered record-highs in both its revenues and earnings last quarter, so there’s clearly nothing wrong with its ability to rake in the dough.

No, the thing that has some investors a little worried is a slowdown in consumer demand for smartphones and personal computers. They’re worried it is a permanent trend towards fewer sales on what have traditionally been Apple’s best-selling items.

Hence the crash in Apple stock. It didn’t help that CEO Tim Cook was in a legal knife fight with the FBI or that China’s economic slowdown was crippling one of the company’s pivotal growth markets. But I don’t see how either of these short-term blips can dramatically undermine the future performance of Apple stock.

It’s almost like the market correction, the one we’ve seen over the last two quarters, swung too hard in the opposite direction. I’ve seen this happen to some beloved stocks before.

Market expectations get so optimistic during the bullish run that they crumble under the slightest pressure. Herd mentality emerges on both the upswing and downward spirals, so it’s fairly predictable that highly traded securities are going to suffer outsized blowback from a dip in market sentiment.

But that doesn’t make it right. Apple is a blue chip stock that still manages to grow like a young up-and-comer, and owning shares in a company that strikes that balance should be every investor’s dream. Being able to pick up those shares at a discount, like the one Apple stock is trading at today, is simply the Holy Grail of investing.

To put it bluntly, there are very few stocks out there as valuable as Apple.