Apple Continues to Prosper Even as It Starts to Resemble Its Dow Peers
As September arrives, the focus on Apple (NASDAQ:AAPL) seems to center around new products. Over the last few years, investors have come to expect the release of the latest version of the iPhone. According to rumors, many of its other products, such as the MacBook and possibly the Apple Watch, will also see updates.
The stock has seen further moves higher recently as it became the first company to attain a $1-trillion market cap. All of these factors have served and will continue to serve as a catalyst to push AAPL stock higher in the months and years to come.
The Focus Shifts to New Product Releases
According to reports, Apple will release a new version of the MacBook Air. Sales have fallen in recent quarters as competition from the likes of HP (NYSE:HPQ) and the Chromebook from Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) have resulted in Mac laptop seeing the lowest sales levels since 2010. Many also believe the Apple Watch will see its own updates.
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However, since its almost September, most of the focus will surround the release of the latest version of the iPhone, by far the company’s top-selling product. Analysts expect a release of three new versions of the iPhone. If one believes the rumors, larger, improved screens and more color choices could be forthcoming.
Apple Is a Buy Despite the Recent Surge
As the new iPhone appears, it should serve as yet another catalyst to AAPL stock. Fresh off breaking through the $1-trillion market cap, the stock has moved to price-to-earnings (PE) ratio levels not seen since 2010. However, this current PE, about 19.5, comes in low compared to its mega-cap peers in tech.
Investors should remember that the stock tends to plateau or sell off slightly after an iPhone release. Despite this possibility, I have a hard time taking a negative view on AAPL stock.
Analysts predict Apple will see profit growth of 27.6% this year. Even the expected average profit growth of 12.8% per year over the next five years indicates steady growth will continue. Finally, now that the stock has passed the $1-trillion market cap level, this psychological barrier will no longer hold AAPL back.
Think of AAPL as a Dow Stock
Although I remain bullish, I would also encourage stockholders to treat AAPL as more of the Dow Jones Industrial Average stock it has become rather than as a high-growth tech stock. No, I do not say this only because Warren Buffett recently added to his position in AAPL stock.
Since Apple has become the world’s largest company, every move higher becomes a record market cap. From its current point, new buyers of AAPL stock will not double their money until the market cap passes $2 trillion. AAPL has placed itself on track to surpass this milestone and probably higher ones. Still, I expect some psychological drag as it nears and exceeds such inflection points.
Moreover, the company pays dividends comparable to its Dow peers. The yield of around 1.35% will probably not serve as a primary motivation to buy. However, since introducing dividends in 2012, the company has increased its payout every year.
If AAPL maintains these increases for another 18 years, it will become a dividend aristocrat. Assuming the company maintains this pace, it would reinforce Apple’s reputation as a safe stock for preserving and growing wealth.
Bottom Line on AAPL Stock
Updated products and new milestones will continue to bolster the position of AAPL as the world’s largest company. September will soon arrive, and most of the focus will turn to the iPhone. However, rumors have surfaced that the MacBook, Apple Watch and possibly other products will see new product releases.
Such improvements should strengthen AAPL stock, even as it has just become the first stock to surpass the trillion-dollar milestone. Given its size and its traditionally low PE ratio, investors should look at Apple similar to its peers in the Dow index.
It will likely not see the kind of growth it enjoyed over the last 15 years. However, for those who want to preserve wealth in an individual stock while collecting a modest dividend, finding a better choice than AAPL stock will prove difficult.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
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