They say there is always a winner and a loser in markets and right now the Samsung battery issues are certainly giving Apple a boost. I am sure by now you have read the various stories of the exploding batteries in Samsung phones and the recall of the Galaxy Note 7 phones. Even before this news Apple was doing better and the share price had broken above its 50 and 200 day simple moving average which is a positive sign.

Apple results are out 25th October and overall I think will be better than many analysts are expecting. Reports are showing that iPhone 7 sales have been fairly robust and the 7 plus sales have been better than expected. This is important at the 7 plus is a higher value phone. The Samsung issue should also see a good amount of extra sales switching to Apple.

Many still see Apple as a hardware company and of course the iPhone is the big revenue earner but services such as iTunes, iCloud, app store and apple care warranty to name a few are becoming a more important part of the business. You can see the breakdown here of Q3 results https://www.apple.com/pr/pdf/q3fy16datasum.pdf

As an example of the power of iTunes it’s reported that Apple will make more from the Pokémon game craze than Nintendo because of the way they take a revenue cut from the iTunes store. http://money.cnn.com/2016/07/20/investing/pokemon-go-apple-nintendo/

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Chart of Apple

 

Apple stock is not expensive

The dividend yield is near 2% on Apple P/E is around 13 which is at a discount to the S&P500 on 18 – the stock is up 7% for the year so far – I think we can go up another 7% before year end so say $125 a share. Those wanting to increase returns could look at using a call option. Apple also holds a large cash balance and has plenty of scope to increase the dividend and or increase share buybacks which will support the share price.

Apple is also trading on a valuation that does not factor in a new product or blockbuster. Apple are working on many new products in the background and whilst most will not be blockbusters I am sure in the next few years there will be something that catches the market by surprise.

This will also help the NASDAQ100 (QQQ) ETF which is sitting near a new all-time high. As I am writing this we have the US election campaign heating up and I really don’t see Donald Trump being the next president but it would be foolish to dismiss him and there are many that will vote for Trump but I believe it will Hilary Clinton that wins and whilst far from perfect will at least be seen by financial markets as a steady hand. We will then be into the last few weeks of the year which are historically bullish for stocks so markets should end up higher by year end.

 

Trading veteran Vince Stanzione has been trading for over 30 years and has produced a home-trading course at www.fintrader.net  He stresses that before you try trading it’s worth getting some training. He is also the New York Times bestselling author of The Millionaire Dropout published by Wiley.