Could This Strategy Save AAPL Stock?
Apple Inc. (NASDAQ:AAPL) makes for one of the most peculiar cases on the market. Despite being the most profitable company on the planet, AAPL stock remains the most speculative bet.
Apple’s latest quarter was another historic quarter for the company. New records were set. Total iPhone unit sales hit all-time highs. Revenue from its “Services” segment broke all its past records. The “Other Products” segment saw the strongest growth, posting robust double-digit 62% year-over-year growth. “Mac” and “iPad” sales slowed, but they still jointly brought in more than $10.0 billion for the company. All in all, Apple’s first quarter for 2016 was absolutely stellar.
Had Tesla or Amazon—the unprofitable companies that boast much higher stock prices—reported these numbers, their stocks would have skyrocketed. But AAPL stock is a different story.
Mr. Market’s dwindling sentiment for this stock beats me. I tried to put my finger on the problem and I could only spot one:
Mr. Market is acutely myopic. He has been too focused on how many units the company has been selling, rather than focusing on how much money it has been making.
But it seems as though Tim Cook has already picked on this problem. In a clever move, the Apple CEO is now keeping this metric a secret for Apple’s newest product, the “Apple Watch.” Since its launch in April last year, Cook has kept mum on giving away the number of Apple Watch units the company has sold.
The CEO has instead let Mr. Market’s imagination run wild. That strategy has greatly helped. All we have at our disposal now are independent research reports. We have many estimates, but no concrete figures.
Isn’t that ideal? Let me explain why I believe so…
As long as investors know that new products are selling and bringing in more money for the company, what more do they want? This strategy will, at the very least, keep the traders who trade on quarter-to-quarter numbers at bay.
For investors who really want to know “units,” Tim Cook has revealed a better metric. In the latest quarter, Apple reported it achieved a major milestone: the company connected a whopping one billion units of Apple products—“iPhones,” iPads, Macs, “iPod Touches,” “Apple TV,” and “Apple Watches”—in its active userbase. That, too, in just 90 days! (Source: “Q1’16 Earnings Supplemental Material,” Apple Inc., January 26, 2016.)
If you look at the unit figures this way, it completely changes the perspective. Achieving that kind of number in just three months is a feat no other company could have achieved.
Maybe Apple should try employing this strategy for all of its products. It might hurt the Wall Street wolves, but it may return a positive surprise for holders of AAPL stock.
The Bottom Line on AAPL Stock
It hurts to see AAPL stock trading near its 52-week low, despite the company being the most profitable in the world.
Better yet, it has now also proven to be the most customer-oriented company in the world. Apple’s ongoing fight with the FBI has brought in more respect for the company from consumers. The outcome of the fight remains uncertain, but one thing is sure: millions of Apple users now stand with the company and millions more will join in for the same reason.
For a long time, BlackBerry was celebrated for being the most secure platform. That perception has changed, with Apple taking center stage.
At the same time, its growth story is continuing—if not in its old segments (iPad and Mac), then in its new segments (services and other products).
The way I see it, AAPL stock looks dirt cheap at its current lows.