Apple Inc. (NASDAQ:AAPL) has failed growth investors time and time again over the last two years or so. The company, which showed massive growth in the years immediately following the release of the iPhone, has failed to move as investors would wish, and the loss of value in the world’s most-valuable company has been shocking. One analyst reckons the period of stagnation is over for Apple, and, like so many before her, says that now is the time to invest in the company.
Katy Huberty of Morgan Stanley (NYSE:MS) says that Apple Inc. (NASDAQ:AAPL) stock has been de-risked in the run-up to the firm’s 2014 product launches. According to the analyst, investment in research and development is a key indicator for growth in Apple stock. The company’s large investments in recent years suggest it is about to enter new product categories, and that means growth is likely on the way.
Apples grows on the back of investment
Huberty’s analysis is based on the back of the most common assumption about Apple Inc. (NASDAQ:AAPL) business: the company needs to release new products in order to grow. The Morgan Stanley analyst is attempting to predict the release of new products, and investment numbers are her key to that prediction.
According to the analyst, Apple Inc. (NASDAQ:AAPL) R&D spending has been increasing by around 30% year on year since 2010. Given the sheer size of that budget, it is likely, according to Morgan Stanley, that the company is working on entering new product categories. Huberty says that mobile payments and wearable devices are the most likely avenues for the company’s coming releases.
Investors are according to the analyst, underestimating Apple Inc. (NASDAQ:AAPL) potential, and not pricing in the effect of coming product launches. The analyst is also optimistic on the company’s March quarter, and sees iPhone demand coming in higher than expected. The analyst put a $630 price target on shares in Apple, and called the equity “de-risked.”
Apple potential fails time and time again
Very few would argue that Apple Inc. (NASDAQ:AAPL) is unable to forge new product categories or that the company lacks innovative engineers, it is easy, however, to argue that those attributes have done the company little good in recent years. As growth stalls in the company’s pivotal iPhone business Apple needs another path for growth.
Apple Inc. (NASDAQ:AAPL) has the ability to create great products, but it hasn’t done anything to grow revenue substantially since the release of the iPad. Calling the firm’s stock “de-risked” is an interesting, and possibly misleading, way to say stagnant. Apple shares may have kept the majority of their value in recent times, but they haven’t returned much value to investors.Cash itself is “de-risked,” that might be why the company insists on holding onto so much of it.
