You need Apple in your portfolio, this investor says

For investors of all stripes, one stock that has seems to have it all is Apple (Apple Stock Quote, Chart, News, Analysts, Financials NASDAQ:AAPL). That’s according to David Fingold of Dynamic Funds, who thinks the tech giant ticks the right boxes.

“We do own Apple and we are optimistic about it,” say Fingold, Vice President at Dynamic who spoke on BNN Bloomberg on Friday.

“I’m not sure that it’s the best idea that I’ve got, but it does make sense given the new product launches that they’ve got and the increasing penetration of services within their business that Apple can continue to do well,” he said.

Apple recently delivered fiscal third quarter earnings that ended up well ahead of analysts’ expectations on the top and bottom line. Sales for the company’s Q3 fiscal 2021 were up 36 per cent year-over-year to $81.41 billion, way above the consensus call for $73.30 billion. (All figures in US dollars.)

Net income was $21.74 billion compared to $11.25 billion a year earlier or $1.30 per diluted share compared to $0.65 per share a year ago.

By segment, iPhone sales were up 50 per cent to $39.57 billion (versus the consensus $34.01 billion), Services revenue was up 33 per cent to $17.48 billion (versus the consensus $16.33 billion) and Other Products was up 40 per cent to $8.76 billion (the consensus was $7.80 billion).

Apple surprised on gross margin, hitting 43.3 per cent compared to the expected 41.9 per cent, and while the company declined again to provide formal guidance, citing COVID-19 uncertainties, management did say it should be showing double-digit revenue growth for the current fiscal Q4.

“Our record June quarter operating performance included new revenue records in each of our geographic segments, double-digit growth in each of our product categories, and a new all-time high for our installed base of active devices,” said CFO Luca Maestri in a July 27 press release.

“We generated $21 billion of operating cash flow, returned nearly $29 billion to our shareholders during the quarter, and continued to make significant investments across our business to support our long-term growth plans,” Maestri said.

Apple’s share price has been flat in recent weeks but the stock is about 11 per cent year-to-date.

Fingold says Apple became attractive earlier this year.

“Apple hit a peak stock price last August. It was around the end of last August or around September 1 of last year. And then the stock basically went into a sideways consolidation while it has continued to grow its earnings and also as its continued to prepare new products,” Fingold said.

“And by going sideways over that time period it became attractively valued and we made a decision over the last several months to get involved, and I expect that it will do well,” he said.

“So the answer to that is, yes, I do think it should be a core holding. The bigger question is going to be whether or not there are ultimately some better ideas, but for people who are looking for a large cap well-financed dividend paying company with a strong scope for increased returns to shareholders and innovation, it makes sense for Apple to be a core part of a portfolio,” Fingold said.

Leading up to the third quarter results, Monness analyst Brian White reiterated his “Buy” rating on Apple and $180 target price with a projected one-year return of 24 per cent.

White said, “During this crisis, we believe Apple has enhanced its value proposition in the eyes of the world by introducing new innovations, supporting a more digital lifestyle, and attracting new consumers to Planet Apple.”

Speaking on the stock in mid-July Gene Munster of Loup Ventures told CNBC that while the fiscal Q2 was “the best quarter” Apple had in over a decade, the road ahead looks great and Apple is perhaps the best-positioned stock among the big tech FAANG names.

“Ultimately that I think the best days are still ahead of the company, whether it’s 5G, augmented reality, what they’re going to do in health care and transportation and other additional services,” said Munster, speaking on CNBC. “And so, what does all of that mean? How does it all play together? Is this going to continue to be a growth story, which I think can power earnings higher? The Street’s looking for about $5.50 [earnings per share] for next year. I think that number is closer to $6.”

“When you put it all together, I think that this is a $200 stock. Let’s just call it 40 per cent upside,” he said. “I’ve been bullish on Apple for a long time. I made a prediction this year that Apple would be the top performing FAANG stock. And that’s probably not going to happen — Google’s up 44 per cent, Apple’s up 9 per cent — but if I set aside that prediction, which probably isn’t going to happen, I believe that Apple’s going to be the top performing FAANG in the back half of the year because ultimately I think it can get a lot better and I think that this company’s best positioned of all of FAANG.”