Is it Time to Embrace a Series of Good-News Events at Apple?

Dee Gill

There has been a smattering of good news of late for Apple (AAPL), a company whose shareholders could surely use much more of it. Really, it’s just a few small items that might, perhaps, ever so slightly, improve Apple’s future. But they also represent just the sort of string that savvy value investors gather to determine when its time to buy cheap, dividend paying shares like Apple.

*Tech industry watcher IDC Wednesday forecast 174.5% growth for the tablet market between 2012 and 2017, higher than past forecasts. Smartphones and tablets, which happen to be two key Apple products, will comprise some 83% of the market for connected devices by 2017, up from about 71% in 2012. It also noted that Apple made significant market share gains against chief competitor Samsung in both categories during the last quarter of 2012.

*Value investing god Bill Nygren told CNBC last week that his fund is adding Apple shares this quarter. He was coy about how much he was buying and at what price. However, he also included Apple among a list of tech stocks he likes now for low valuations (Apple trades at a PE ratio of 10); modest dividend yields (2.4% now) and a share repurchase plans ($45 billion over three years). Last quarter, several big value funds added heavily to their Apple stakes, but at least as many sold.

AAPL PE Ratio TTM Chart
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AAPL PE Ratio TTM Chart

*T-Mobile confirmed this week that it will carry Apple’s iPhone as part of its unique set-up that allows customers to buy it in installments rather than sign up for a service contract. It’s expected to be a top seller for T-Mobile, and analysts believe it will help Apple boost its domestic market share. There are similar expectations for a rumored cheaper version of the iPhone later in the year.

*The chatter on Twitter about a new Apple iPhone drowned out the tweets about Samsung’s Galaxy S4, according to an actually serious study by Investing Analytics. The iPhone launch got millions more tweets at its launch than the Galaxy. At least one industry analyst took this to mean the iPhone still has much more mass market appeal. Piper Jaffray noted those results on Wednesday and reiterated an overweight rating on Apple shares.

Can these types of little coups turn Apple’s fortunes?

AAPL Chart
View photos
AAPL Chart

There’s still at least as much bad news as good. A whole lot of market watchers expect Apple to miss the market’s earnings projections when it reports in late April. There are reports that it cut second quarter orders for its new iPad Mini. Competition has caught up with Apple technology, and analysts expect steady profit margins shrinkage going forward.

AAPL Profit Margin Quarterly Chart
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AAPL Profit Margin Quarterly Chart

The market wants another nifty, high margin product from the company – perhaps Apple TV -- to turn it into a growth stock again. But many analysts believe it can be a fine investment without one, especially considering the cash it has on hand to keep investors pacified. They expect the company to keep dividend increases and share repurchases flowing regardless of operating issues.

Besides, by the time all the tea leaves predict happy days ahead, the opportunity for value is usually long gone.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.


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