Even with all its gains this year, Apple (Apple Stock Quote, Chart, News NASDAQ:AAPL) couple still be worth a look. That’s according to portfolio manager Bruce Murray who says Apple could be making money hand over fist when 5G-enabled phones start selling.
“Apple is the market darling at the moment —it’s the world’s largest company and has been on a tremendous roll. It’s doubled in the last five years so 100-per-cent per annum,” said Murray, CEO of the Murray Wealth Group who spoke on BNN Bloomberg on Monday.
“The current excitement is about 5G. Apple users tend to be among the wealthier end of the population so they'll probably be fairly quick to move to buy 5G phones and Apple will be the beneficiary of that,” he said.
Apple’s share price has skyrocketed in the lead-up to a four-for-one stock split, set to occur after market close this Friday (but with the record date determining which shareholders are entitled to receive additional shares having occurred on Monday). Since bottoming out at $224 per share in late March, AAPL has gained over 120 per cent, as investors pile into Big Tech in the wake of COVID-19’s disruption of business worldwide.
Far from being hobbled by COVID, Apple has seen a rise in sales, with revenue up to a record $59.7 billion for its most recent quarter, Apple’s Q3 delivered on July 30. The company saw double-digit growth in both its Products and Services segments, a show of how integral Apple is to people’s lives and businesses, management said in its Q3 press release.
“Our June quarter performance was strong evidence of Apple’s ability to innovate and execute during challenging times,” said Luca Maestri, Apple’s CFO. “The record business results drove our active installed base of devices to an all-time high in all of our geographic segments and all major product categories. We grew EPS by 18 percent and generated operating cash flow of $16.3 billion during the quarter, a June quarter record for both metrics.”
Apple beat analysts’ estimates for the quarter, generating EPS of $2.58 per share on its $59.7-billion top line. Analysts were calling for $2.04 per share and $52.25 billion.
Sales of the iconic iPhone came in at $26.42 billion for the quarter, a typically low period compared to other quarters when, for example, the company launches new models, often during the calendar fourth quarter.
Murray said the higher valuation affixed to Apple of late may or may not be justified, depending on how you look at the company and its growth potential.
“The issue with Apple now is it used to trade at a 15x to 20x ratio but it's now at 40x. As we talked earlier, though, with current interest rates the current price for Apple can probably be justified on the capital asset pricing model,” Murray said. “I guess the issue is, how long does Apple remain the cachet product, and if you believe it’s going to remain the cachet product then go ahead and invest.”