On Monday the headlines were filled with one company: Apple (NASDAQ:AAPL) as the company kicked off its annual developers’ conference. Let’s drill down the highlights and see what this means for the tech giant as it continues to deal with a more competitive gadget market.
Apple is a regular in the major market headlines, as consumer appetite for its products seems to be nearly insatiable. People around the world will gladly stand in line for hours, even days, to be among the first to get their hands on the next generation of products.
From tablets to smartphones to mp3 players, Apple has made its mission to put the “i” in consumer electronics. The company’s iPod and iTunes lead the digital music industry, and the iPhone is one of the hottest smartphones out there. AAPL also hasn’t forgotten its personal computing roots and has cut into the dominance of Windows with its OS X operating system and fleet of Mac computers.
Apple kicked off its developers’ conference by unveiling its new ultra-thin MacBook laptop, complete with its revolutionary “Retina” display with four times the resolution of previous models. Apple also introduced the next version of iOS6, its popular operating system that runs on the iPhone, iPod Touch and the iPad.
This version will include Facebook (NASDAQ:FB) integration, new features for its Mail app, and a whole new mapping solution that incorporates traffic information and automatically re-adjusting routes. Siri, Apple’s revolutionary personal assistant software, is also getting a facelift with new functionality related to sports stats, restaurant reservations, movie listings and launching apps.
In the most recent quarter, the company sold more than 35 million iPhones, 11.8 million iPads and four million Macs. So it’s no wonder that company leadership announced first-quarter operating performance that knocked estimates out of the park.
Apple’s net profits boomed 94% year-on-year to $11.62 billion, or $12.30 per share—a 22% earnings beat to analyst estimates. Looking ahead to the next earnings announcement, which is slated for late July, the analyst community expects Apple to grow sales by 31% and earnings by 33%.
Dividend and Share Buybacks
I’m also looking forward to the company’s dividend and share buyback strategy. Back in March, Apple announced that it would begin paying a dividend in its fiscal fourth quarter. In addition, Apple will institute a $10 billion stock buyback program that will start on September 30—reducing the number of shares outstanding and boosting earnings per share. Both these developments are great news for investors and for the company, as Apple will have an easier time sustaining its growth rates.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This time last year, AAPL was a C-rated hold. However, it didn’t take long for Apple to firm up its fundamentals.
Currently, Apple receives top marks for sales growth, earnings growth, analyst earnings revisions and return on equity. And with its impressive pipeline and constant product launches, it’s no wonder that this stock enjoys top-of-the-line buying pressure, so Apple also receives an A for its Quantitative Grade.
Bottom Line: As of this posting, June 12, I consider AAPL a strong buy. While there may be some volatility leading up to the next product innovation or creation, I see Apple as a trillion dollar company in the next three to four years and the only way to cash in is to buy shares now.
Recommendation: A-rated Buy
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