Does Apple Stock Have a China Syndrome?
It’s surprising that shares of Apple Inc. (NASDAQ:AAPL) didn’t move higher than they did after the company produced another solid quarter of better-than-consensus financial growth. It’s not that capital gains in Apple stock aren’t prolific.
The company’s most recent quarter really did deliver the goods in terms of both sales and earnings growth. China continues to be the biggest percentage driver of top-line growth.
In a very real sense, an investor who may be wary of a direct investment in emerging markets but wants the growth potential can simply own AAPL stock or something similar.
On a global basis, Apple’s iPhone sales grew an impressive 52% in the 2015 fiscal year just ended.
The company’s China business is burgeoning. Total greater China sales in fiscal 2015 grew 84% over fiscal 2014 to $58.7 billion. Sales in China are one quarter of Apple’s total revenues. They are catching up fast to the company’s total business in all of the Americas.
Where is Apple Stock Going Next?
Apple is the iPhone. It’s two thirds of the company’s total worldwide sales in fiscal 2015. This past year’s percentage net sales growth produced an epic improvement over last year.
iPads are about 10% of the company’s total sales. Unit sales are actually falling on a comparative basis.
Macs are still selling nicely. These products were 11% of Apple’s total sales in 2015 where portables are the driver.
The company’s Services business includes licensing, The App Store, Internet services and AppleCare. This segment continues to grow; it represents about nine percent of total global sales or approximately $20.0 billion in 2015.
Apple has a China syndrome, and it’s the iPhone. But not just the latest model. Apple is selling tons of iPhone 5s and iPhone 5cs in Mainland China and Hong Kong.
The company is just awash in cash. Cash, equivalents, and marketable securities came to $205.7 billion as at September 26, 2015 according to the company.
This is why there is just so much more room for dividends to increase going forward and why Apple stock can still be a winner, even when new business growth lessens.
2015’s total dividends were $11.4 billion, up pretty modestly from $11.0 billion in 2014.
Over the last few years, the company bought back $104.0 billion out of a total authorized repurchase plan of $140.0 billion. More share cancelation is part of the company’s business plan.
Apple has plenty of resources to keep stockholders happy. Its shares are not expensively priced and Chinese operating momentum is robust.
Apple stock can tick higher going into 2016 but here’s the thing—a lot of good news is already priced into the position.
Here’s the Bottom Line on Apple Stock
By all accounts, Apple remains a very large-cap growth stock. But investor sentiment regarding the position is seemingly unique compared to other growth businesses.
Near-term, I wouldn’t be surprised if Apple stock drifted because so much good news is already built into its share price.
China is the key for the company’s “outperformance” going forward. One more big growth quarter of iPhone sales to China should be a good catalyst for the stock.