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Apple Stock: Still a Buy at an All-Time High?


Oct. 15 2019, Published 12:38 p.m. ET

Ever since facing rejection at the $230 resistance level in August of last year, Apple (AAPL) stock has struggled to get its mojo back and make a serious run at new highs. Just recently, however, AAPL broke through that ceiling spectacularly, forcing short sellers to cover their positions and naysayers to retreat into their proverbial caves.

That’s all fine and good. But it leaves value investors with the question of whether Apple stock could be considered a bargain by any metric at these levels. Or perhaps there’s a more profound question at work here. Is the company so dominant that valuations don’t matter anymore?

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Apple earnings

It won’t be too much longer before tech companies report their quarterly earnings and revenues. And Apple is always a highly anticipated participant in the lineup. October 30 is the scheduled day for Apple’s earnings announcement, and if it’s anything like the previous two quarterly reports, investors could expect a positive surprise.

As you may recall, Apple’s third-quarter results indicated blockbuster revenues. CEO Tim Cook euphorically proclaimed, “This was our biggest June quarter ever — driven by record revenue from services, accelerating growth from wearables, strong performance from iPad and Mac and significant improvement in iPhone trends.”

Notice, though, that Cook neglected to mention that iPhone sales were down by 12% during that quarter. Still, there was enough strength in other Apple segments to pick up the slack—at least according to the CEO.

September 10 was another banner day for AAPL stock. The company revealed its latest iPhone offerings, an event that almost rivals earnings announcement day for Apple investors. Apple product aficionados and shareholders alike were delighted at the iPhone’s base price tag of $699. They also were pleased with the announcement that the Apple+ subscription streaming service would be available for just $4.99 a month.

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Apple+: Priced for perfection?

The Apple+ reveal was especially compelling for shareholders concerned that the company won’t be competitive in the content-streaming space. It will be challenging for Apple to take market share from the likes of Netflix (NFLX), Disney (DIS) with its Disney+ streaming service, and Roku (ROKU).

Underselling is the strategy when a company offers a product at a lower price than its competitors. And underselling could be just the right tactic here. Apple+ probably won’t be able to match the vast content offerings of Netflix and especially Disney+, which will feature a massive backlog of popular movies and TV programs.

It’s amazing to consider that a company with a trillion-dollar market cap would struggle to compete against these companies. But Apple’s a latecomer to the streaming wars, and it has some catching up to do. With content offerings like Masters of the Air, which will be a sequel to the highly popular miniseries Band of Brothers, Apple+ could be the dark horse that ends up winning the race.

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Apple investors, don’t forget about 5G

The 5G network is, I believe, the future of telecommunications. And Apple is making strides into this emerging technology. Optimism is growing that consumers might see a 5G-powered iPhone in 2020. And one source has claimed that Apple has been accelerating its 5G-development timeline.

On the other hand, not everyone is so optimistic regarding the prospective 5G iPhone rollout. In particular, Goldman Sachs (GS) analyst Rod Hall has expressed his concern that the hype isn’t justified. He also suggested that iPhone users won’t notice any difference between a 5G and a non-5G iPhone.

“In terms of bandwidth, what you’ll experience in terms of speed isn’t going to change much. This is mainly a technology change,” claimed Hall. But he also conceded that the “Apple brand is still very strong”—and he certainly won’t get any argument from me on that point. Either way, I expect that Apple will have to roll out a 5G iPhone sooner or later, so at least it’s getting the ball rolling.

AAPL stock not cheap—but still a “buy”

Okay, so AAPL stock is trading at a high price. But it took a long time to get there, and I believe that even an expensive stock can still present a good value when the company is profitable and forward-thinking. Apple’s still a “buy” as far as I’m concerned.

And don’t be surprised if new price peaks are on the horizon. Bet against AAPL stock if you must, but don’t call me if you lose your shirt.


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