This Could Send AAPL Stock Soaring
There has never been so much bearish sentiment surrounding Apple Inc. (NASDAQ:AAPL), a company that once believed it could hit a $1.0-trillion valuation. With the AAPL stock price dipping below the $100.00 mark, could this be the end of Apple?
Well, not really. You see, despite the company’s products being hyped up a bit and there certainly being plenty of Apple trolls on the Internet, the truth is that Apple is still a solid company.
AAPL Stock: Apple Music Reaching 10 Million Subscribers
The neat thing about Apple is that when the company announces something, it almost always turns into a big hit. Taking “Apple Music” as an example, when Apple first announced the streaming service back in June of 2015, it wasn’t that much of a big deal because the music streaming industry already had a strong incumbent, Spotify. Well, six months later, Apple Music is still around and could give Spotify a serious run for its money.
Sources told The Financial Times that Apple Music has achieved more than 10 million subscribers in just six months. How long did it take for Spotify to reach 10 million subscribers? A whopping six years. (Source: “Apple’s Music Streaming Subscribers Top 10M,” Financial Times, January 10, 2016.)
Mark Mulligan, music industry analyst at Midia Research, said that at the current growth rate, Apple could overtake Spotify and become the leading music streaming service in 2017.
And let’s not forget how much cash Apple has on its hands—more than $200 billion by the end of its most recent quarter. Sure, most of Apple’s cash is stored overseas and if the company wants to bring it back, it would have to pay quite a bit in U.S. taxes. However, with activist investor Carl Icahn stepping in, things could be different.
In October 2015, the billionaire investor announced his plans to launch a super PAC in an effort to reform corporate taxes. Starting with $150 million of his own money, the super PAC would focus on overhauling the U.S. tax system in order to keep corporations from moving their headquarters overseas. (Source: “Letter Discussing Desperately Needed Legislation,” CarlIcahn.com, last accessed January 8, 2016.)
One crucial part of Icahn’s proposed reforms is to make it easier for U.S. companies to bring back their cash from overseas. Right now, companies that want to bring their money back to the U.S. might decide not to because of the “double tax” they have to pay if they do. Yep, Apple is one of them. Icahn said that companies should be willing pay a five percent to 10% incremental tax on this money.
If Icahn’s super PAC turns out to be successful in this matter, Apple could bring its huge pile of cash back to the U.S. and that could benefit Apple’s investors in a tremendous way. The tech giant would be able to use its massive hoard of cash for acquisitions, dividends, buybacks, and the development of whatever kind of gadget Apple could come up with next.
With Apple’s price-to-earnings multiple hovering at just above 10, analysts are beginning to turn bullish on the company. Mizuho Securities analyst Abhey Lamba just raised his rating on AAPL stock from “Neutral” to “Buy,” noting that “While we [Mizuho Securities] acknowledge weaker data points from the supply chain and softness in China, we believe similar to last year, investors are likely making a mistake in extrapolating the data to eternity.” (Source: “Apple’s Stock Jumps After Analyst Turns Bullish,” MarketWatch, January 11, 2016.)
The Bottom Line on AAPL Stock
Another analyst, Ananda Baruah at Brean Capital, believes that there is solid upside potential for Apple’s stock price. Baruah said that the implications from the supply chain noise “aren’t nearly as draconian as feared.” What’s his price target on Apple? $170.00 per share—over 70% more than today’s price. (Source: “Brean Capital Maintains $170 Target for Apple Stock, Sees ‘Material Upside’ to iPhone in 2016,” Apple Insider, January 11, 2016.)
With so much being done and so much yet to come, do you really want to bet against AAPL stock?