The Days of a Cheap Apple May Soon Be Overhttp://www.fool.com/investing/general/2013/08/05/the-days-of-a-cheap-apple-may-soon-be-over.aspx Daniel Sparks
August 5, 2013
Even after its recent run-up, Apple (NASDAQ: AAPL) is still a bargain. But how long will the stock stay so cheap?
I've outlined why I think Apple is a buy from several points of view recently: It's fundamentally cheap, consumers still love Apple products, it's a great dividend stock, and the company's massive share repurchase program will create meaningful value for shareholders.
But now with a very likely iPad and iPhone refresh just around the corner, the days of a cheap Apple may soon be over.
The voting machine
What does he mean? Here's my translation: The stock market is forward-looking, but it doesn't look very far -- maybe just a few quarters out. A stock's market value is therefore often determined by its short-term prospects. Over the long haul, however, the weighing machine that measures the underlying substance of the business will win.
So if Apple is likely to hand out unimpressive numbers for a few quarters, the stock becomes unpopular as the Street looks for ways to make money more quickly. This is exactly what happened with Apple's stock over the past six months.
The company's comps were far worse than the blowout Apple results the Street was used to. With a lull in new product launches and lower gross margin levels that looked like they would remain so permanently, the market sensed that Apple would struggle to bring any upside surprise. Sure enough, Apple reported poor to less-than-stellar numbers at best for the last two quarters.
Now, looking forward out over the next few quarters, comps could start to look rosy again. Other than the obvious possible upside from some new products the Apple CEO Tim Cook said it would launch during the quarter, the company is guiding for a solid fourth quarter, too.