There is this hot, exciting company out there you should know about. The company is a real triple threat: great technology innovators, great product designers, and great marketers. The stock is both a great trading vehicle and an outstanding long-term investment. The real kicker is, it’s not too late to get involved! I’m talking, of course, about Apple Inc. (AAPL). For reasons mystifying to me, the stock has become somewhat controversial.
Apple is not without its share of ardent skeptics. In fact, I have been on CNBC five separate times going against an AAPL bear. They say the stock’s rise is the result of groupthink. They cite Steve Jobs’ tenuous health as a concern. They say competing products are as good, if not better. They also lose a lot of money if they indeed are putting their money where there mouth is.
Apple is indeed a goliath at a more than $300 billion market cap. The company is fast approaching Exxon Mobil (XOM) as the country’s largest corporation by market cap. There was an interesting piece that ran over at The Big Picture Tuesday that asked ‘if Apple were a sovereign economy, where would it stack up in the world pecking order?’
The answer is 31st, checking in only two spots behind Iran and one spot ahead of Greece. Although market cap to GDP is not exactly an apples to apples comparison (no pun intended), it provides some perspective on the sheer size of the thing. Even using just cash and investments, Apple checks in at 73rd just ahead of the Dominican Republic.
But does sheer scale disqualify you from being a good value investment? There is no reason it should. Apple, with a modest trailing P/E of 22.01, revenue growth of 67% yoy and PEG ratio of only 0.86, is significantly undervalued. The company has proven itself to be a premier innovator. It’s latest brain child, the iPad, has been a success but is still just scratching the surface of its potential and reach. A recent example that reinforced this idea is that hospitals are starting to use iPads to become more efficient.
Although Google’s Android has been wildly successful, the Apple iPhone still holds a significant chunk of market share and stands to gain tremendously from its long overdue release onto the Verizon network. The mobile search market in general stands to be one of the next great tech growth stories over the next decade, so there is enough pie for both Google and Apple. The question is not about which one of those stocks you should look to own, but why in the world you wouldn’t own both.
Does AAPL have a target on its back? Yes, but that simply comes with the territory. The important question is, will, at any point, their brand deteriorate? Ever since the iPod came out there has been analysts saying that competition will eat into profits and slow growth. Remeber the Microsoft Zune? I do. . .barely. Tablets had already been around when Apple introduced the iPad, but the power of their brand is what has driven sales. I don’t trade or invest based on judgements on someone’s health (Steve Jobs), and although he will one day leave his perch, the company at this point is more than just one man. Apple is a trendsetter, a market creator, and in my mind there is no reason to think that fact will not endure.
Today the company also launched the Mac App Store, an attempt to bring the iPhone and iPad app store concept to Mac computers. For better or for worse, the younger generation has driven the growth of social gaming sites like Zynga as well as spawned social media empires like Facebook. Apple is getting in on the noble cause of curing the devastating affliction that is boredom. AAPL will continue to innovate. It is both a value and growth story at this point. AAPL bears have me scratching my head.
Here is the CNBC clip from earlier today if anyone’s interested.
Previous posts: Apple Revs Up for the Run Past 300
John Darsie contributed to this article.
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