Is Apple Inc. a $200 Stock? It’s Possible
Over the next couple of years, you could make triple-digit gains in one of the most remarkable companies on Earth: Apple, Inc. (NASDAQ:AAPL). No, you won’t get rich quick, but as I’m about to show you, huge innovations from Apple are coming over the next few years. Before the move is over, we could see AAPL’s stock price double or more.
Here are three reasons to be bullish on Apple stock.
1. Smart Money
The world’s smartest money managers are betting on Apple.
According to recent Securities and Exchange Commission (SEC) filings, legendary investor David Einhorn has upped his stake in the company over the past few quarters. As of September 30, the billionaire hedge fund manager owns 11.7 million shares, valued at $1.3 billion. (Source: “Greenlight Capital 13-F Filing,” Securities and Exchange Commission, November 17, 2015.)
And he’s not the only one. Over the past few quarters, a number of money-maven managers, including Cliff Asness, Philippe Laffont, and Ken Fisher, have built up big stakes in the company. Activist shareholder Carl Icahn also owns a $6.6-billion position in AAPL stock.
Apple is a cash flow machine. Over the past year, the “iPhone” maker has generated more than $53.5 billion in profits. To put that number into perspective, that’s enough to purchase the entire economic output of Lebanon.
Because the company is so profitable, Apple is now sitting on $205 billion in cash and short-term investments. This will likely translate into more AAPL stock buybacks and bigger dividend payments in the years ahead.
Despite the company’s exceptional profitability, AAPL stock gets about as much respect as an oil executive at a Greenpeace rally. Today, shares trade at about 10 times the company’s forward earnings, far below its peers like Facebook, Inc. and Alphabet Inc. If you removed the enormous cash pile on the company’s balance sheet from the equation, investors are only paying about seven times its forward profits for the actual business.
This is okay if you’re worried about declining margins in the technology industry. Apple may look profitable today, but it’s unlikely iPhones and “iPads” will be able to change the same premiums 10 years from now. However, this view fails to appreciate the list of “moonshot projects” Apple has under wraps in Cupertino that could revolutionize our world in the years to come. In essence, investors get a free option on innovations, from the “iCar” to “Apple Pay.”
The bottom line: Apple is a wonderful business at a bargain price. I wouldn’t be betting against this stock.