The Case for Buying Apple
One thing I'm not going to do in these pages is speculate.
I have no idea how many iPhone 5s models Apple is going to sell in 2013. I don't know what implications moving to a 64-bit architecture on the iPhone could mean for Apple's Macintosh lines. I don't know how the public is going to react to the release of iOS 7 next week.
And I certainly don't know if Apple is going to release a watch, a television, or a submersible flying car later this year.But what I do know is that Apple took a strategy for selling phones that's been supremely successful for the last six years, and they made it objectively better. Yes, contrary to the headlines in the last year, and contrary to Apple's share price action, the firm's sales have been stellar. In the trailing 12 months, Apple has earned a record $37.7 billion in profits on $169.4 billion in sales - that's a 22% net profit margin. Can Apple sustain its breakneck growth rates forever? No - of course not. There aren't enough human beings on the planet to keep that pace up. But even if Apple was guaranteed to never grow again, just keep pace with its current numbers, it will earn enough profits to cash out every share in just seven years. That's ludicrous. And that assumes that Apple won't get any of the huge smartphone market growth estimated for the next several years. That's not even a conservative scenario; it's the worst-case scenario. The cash situation in Apple is unthinkable for a firm of its size. As of the most recent quarter, Apple held $146 billion in cash and investments - as I write, that's enough to pay for more than a third of the firm's outstanding shares. So, take out Apple's enormous cash reserves, and the firm's trailing price-to-earnings ratio drops to 7.5. For comparison's sake, Google (GOOG) trades for a whopping 27.5 times earnings right now. Apple hasn't had any trouble executing its strategy. Instead, it's only had trouble convincing investors to buy its stock.
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