Arie Goren

About the Author Arie Goren

Arie Goren is a senior global analyst at Sigma Wealth Management/ ANDBANK GROUP. He has 37 years of experience in the world financial markets specialized mostly in the American stock markets and commodities. Arie Goren has been writing many investment articles in important financial websites and financial newspapers like Seeking Alpha, Amigobulls, TalkMarkets, Born2Invest, Bizportal, Themarker, Calcalist, Globes and others. He has also developed very successful strategies for creating winning portfolios according to specific formulas. In January 2015, he was ranked among the world’s top 10 financial bloggers according to TipRanks, which holds financial experts accountable for their recommendations by disclosing their stock ratings since 2009.

Apple Inc. (AAPL) Has Additional Growth Drivers Besides iPhone

By Arie Goren

The legendary Fidelity Magellan Fund manager Peter Lynch suggested in his best-seller book “One Up On Wall Street: How To Use What You Already Know To Make Money In The Market” to just look around in order to find promising investing candidates. Well then, when I am looking around, what I see? Apple Inc. (NASDAQ:AAPL)! My family members and I are using iPhone for communication, iPad to read books and browse the internet, Apple Watch for monitoring sports activity, Apple Music to listen to music and iMac for working purpose. As such, it is hard to believe that we like many others are going to change this dependence on Apple’s products.

On June 5, Apple had its annual conference for developers and application creators, where it emphasized the fact that it is not only a smartphone company, but it has many other growth drivers. While investors are waiting for the upcoming iPhone 8 which could get high demand, let’s focus on other very promising Apple’s products.

In the conference, Apple announced the launch of some new hardware products including two new iPad Pros, a smart speaker called HomePod which will compete with the successful Amazon Echo and Google Home, and of updates to iMacs and MacBook laptops. The company also presented improvements it has made to the software that runs on iPhones, iPads, iMacs, and Apple Watch.

As I see it, Apple Watch of which sales almost doubled in the recent quarter from last year level is going to achieve great success. As Apple Watch Series 1 was a good smartwatch the Apple Watch Series 2 represents a significant improvement with its GPS and its waterproof ability. As far as I know, it is the only smartwatch that can record open water swimming details. What’s more, in the conference, Apple announced many new features to the watch which could make it even more attractive. According to the company, it is dedicating much work into making Apple Watch easier for athletes and workout persons to use. Apple is introducing new workout updates including an easy-to-access button, for those individuals who swim or bike in the same workout. Also, the company redesigned the music application on the Apple Watch which automatically syncs, favorites mix, new music mix as well as most listened to music. According to the company, with more songs on the watch and the simple combination of the watch pairing to AirPods, listening to music becomes ideal for workouts or on the go.

In my view, the new home speaker the HomePod could attract high demand. After all, Amazon Echo had been a best seller during the holiday sales, and Apple has dedicated much effort to make its speaker sound good. According to the company, the new home speaker has seven tweeters and a big woofer, it also has a model A8 powerful chip inside, and it can adjust the audio by detecting the space within the room.

Valuation

Some investors might worry that after climbing 32.9% year to date, and 57.2% over the last year, AAPL’s stock is overvalued right now. However, with trailing price to earnings ratio of 18.0, forward price to earnings of 14.7, and enterprise value to earnings before interest, taxes, depreciation and amortization ratio (EV/EBITDA) of 11.30, the stock is certainly not overvalued. What’s more, according to Portfolio123’s “All-Stars: Buffett” ranking system, which is based on investing principles of the well-known investor Warren Buffett, AAPL’s stock is ranked second among all 68 S&P 500 technology stocks. The 20 top-ranked S&P 500 technology companies according to this ranking system are shown in the table below:

Conclusion

Despite the strong appreciation of AAPL’s stock over the last year, in my opinion, it still has considerable room to rise. Besides the upcoming iPhone 8, the company is continuing to launch new promising products, and it is improving its operation systems. The best performing analysts, according to TipRanks, are giving the stock an upside of 8.7%. However, in my view,  AAPL’s stock could run much higher.

DISCLAIMER: I own shares of AAPL. This article expresses my ideas and opinions. I believe that the information I have given in this article is from reliable sources and accurate. I recommend readers to do their research before making any investment decisions.