I guess I can scratch an iPhone that has a big screen and folds off of my holiday wish list.
Regular readers know I’ve been outside the box on this one calling for Apple to produce a foldable with a bigger screen and, yes, a bigger price… like $2,500.
It’s a lot, I know. But I think there would be enough of a market for a premium next-generation iPhone that takes the device to another level.
As it stands now after this week’s launch of the iPhone 14, Apple Inc. (NASDAQ:AAPL) continues to make improvements – and some really good ones. They move the ball forward, but they don’t really change the game.
It also introduced new AirPods Pro as well as four Apple Watches. The Ultra seems to be getting most of the attention. It is closest to what I was looking for in the iPhone. Apple calls it “the most rugged Apple watch ever” with a “revolutionary new design with breakthrough capabilities.” The company went big on the screen, big on the battery, and big on the price tag (starting at $799).
I can’t be too critical of Apple, though. It is one of the most successful and impactful companies in history. I know fights can break out between “fan boys” and haters; we can’t deny that more than half of the phones in the U.S. are iPhones. We also can’t deny that Apple is the most valuable company in the world with a whopping $2.5 trillion market capitalization. If Apple were a country, it would rank just behind France with the eighth-largest economy in the world.
Still, all of that hasn’t been enough for the stock to overcome the volatile market, inflation fears, rising interest rates and supply chain bottlenecks. AAPL is down 12.5% here in 2022 and flat over the last 12 months.
The question, as always, is where the stock goes from here in the wake of its latest product announcements…
Solid But Not Spectacular
Apple currently rates a “B” in Portfolio Grader, which is my quant-based system that analyzes multiple factors and assigns a rating to the more than 5,000 stocks in our database. That’s pretty good. A “B” is a buy, and it has held that grade going all the way back to last November, which is impressive in what has been a rough year for tech stocks.
Drilling down a little further, the company earns a top “A” rating for Return on Equity, and a sold “B” in the most heavily weighted category, which is the Quantitative Grade. The quant grade measures the buying pressure a stock is experiencing, especially from institutions. AAPL remains a popular stock.
After that, however, things get a little squishy. The worst grades include an “F” in Earnings Momentum and a “D” in Sales Growth. If I had to point to concerns, it would be those.
Earnings have grown 23.5% a year on average for the last five years, with analyst expectations dropping to 8.7% growth this year followed by 5.7% growth next year. Sales are projected to increase 7% this year and then slow to 4.7% growth in 2023 and 4.3% in 2024.
Based on AAPL’s movement, investors reacted with a bit of a yawn to Wednesday’s announcements. Shares gained less than 1%.
That’s in keeping with the stock’s history. AAPL shares tend to rise heading into iPhone product announcements, and then they often flatten out for the rest of the year. We definitely saw a pre-announcement rise from July through mid-August when AAPL ran 28%. It has pulled back since, thanks mostly to the broader market, but Bernstein analyst Toni Sacconaghi noted that since the iPhone debuted in 2007, AAPL has gained just 1.2% on average in the three months following a launch.
I wouldn’t argue with anyone who wants to buy AAPL. It maintains the “buy” rating in Portfolio Grader, and I think the stock will continue to move higher over time. The question is how much higher and how quickly.
That’s where other stocks – with stronger earnings momentum, sales growth, positive analysts’ revisions, and other key factors – likely have an advantage. These are fundamentally superior stocks with strong buying pressure that typically outperform the market.
Source: InvestorPlace unless otherwise noted
P.S. Apple is a great example of the kind of stock that is on one side of a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it.
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