Apple Inc. (NASDAQ:AAPL) shares soared to a new 52-week high this week and it certainly looks like the stock has gotten its momentum back. But will the momentum hold? Does the company’s valuation look good for investors or not? Several contributors to various sites seem to think so. Also most analysts who follow Apple rate it as a Buy or a Strong Buy.
“Massive gains” for Apple investors
Daniel Sparks of The Motley Fool notes that in spite of the poor performance of Apple shares for much of this year, long-term investors have certainly seen massive gains. He notes that even over the last year, Apple shares didn’t outperform the market as a whole, but they did provide investors with a small gain. He also notes that long-term investors who took the opportunity to invest more dollars into Apple Inc. (NASDAQ:AAPL) after shares took a tumble are now seeing significant gains this year.
Here’s a round up of hedge funds’ May returns
Tyro Absolute Return Fund was down 1.5% for May. The fund's main contributors in May were Super Micro Computer, which gained 1.6%, Shyft Group, which was up 1%, and GCI Liberty, which gained 1%. Detractors in May include Recro Pharma, which fell 2.6%, index shorts and hedges, which declined 2%, and DXC Technology, which was Read More
According to Sparks, it isn’t the short-term picture which tells a lot about whether a company is a good investment. He notes that although investors should not be expecting to see yet another 500% gain (as Apple shares have enjoyed over the last five years), “the horizon looks good.” He notes that the company still has plenty of cash and excellent cash flow. He also says that right now Apple is only paying about 29% of its trailing 12-month earnings in dividends. Sparks believes that the company will reward investors in the future as well, since it can certainly afford to do so.
Apple to start growing again
Three contributors to Investor Place also see Apple Inc. (NASDAQ:AAPL) as picking up steam and carrying momentum into 2014. The stock has recorded 40% gains since June, which is double the gains seen in the NASDAQ’s tech stocks. Contributor Tom Taulli thinks Apple will get its growth “back into gear.”
He sees one of the biggest potential drivers for growth being the deal with China Mobile Ltd. (NYSE:CHL) (HKG:941). He also sees Apple’s new products as being big positives for the company since they still resonate with consumers. The iPad is now becoming the hot gift for Christmas this year. In addition, he points to an expanded product line which now includes several different kinds of iPads.
Areas of growth for Apple
Contributor and editor Jeff Reeves also pointed to several areas of growth for Apple Inc. (NASDAQ:AAPL). He also mentioned China Mobile and the opportunity it provides to place an iPhone into the hands of more than 750 million new potential customers. He says even with a 5% share of that number, that’s still a lot of iPhones.
He also notes opportunities in ecommerce, as Apple users drove 77% of holiday mobile ecommerce transactions. Android users, on the other hand, were just 5% of the share. In other words, Apple wields tremendous power when it comes to closing transactions and making sales online.
Is Apple a bargain?
Taulli sees Apple Inc. (NASDAQ:AAPL)’s valuation as being a bargain. He notes that the company’s forward price to earnings ratio is 11 times, compared to Google Inc (NASDAQ:GOOG)’s 20 times and Microsoft Corporation (NASDAQ:MSFT)’s 13 times.
Contributor Dan Burrows also sees Apple’s current valuation as a bargain, calling it “a screaming buy for 2014.” However, he’s all about the valuation and not about the products. He notes that the company has $45 per share in cash. Also in the past, Apple shares had an average forward price to earnings ratio of 16, which means Apple shares are “on sale by more than 30%.” He also looked at the trailing price to earnings ratio, which is 14—a 26% discount to Apple’s five-year average.