Apple Earnings? Ignore Them and Think Long-Term

by Traders Reserve | April 27, 2013 9:00 am

Apple Earnings? Ignore Them and Think Long-Term

That’s right, ignore Apple’s (NASDAQ:AAPL[1]) earnings released on Tuesday after the bell.

Day traders, go home. Investors, stick around. Focus on Apple, the company, not Apple, the stock over the past few months.

The critical reason to invest longer term is a fundamental misperception — Apple is not a tech company, it is a consumer products company with near-fanatic customer loyalty compared to all competing brands. This is a distinction with a difference. And that is why Apple, long term, is by far the best company and stock among “tech” companies.

Much has been made of Apple’s slowdown – however, a look at very recent data shows a momentum shift.

The physics majors who use Blackberry (NASDAQ:BBRY[3]) devices and now pose as Apple analysts churn out spreadsheet after spreadsheet calculating short-term sales. Since they see AAPL as a tech company, they are missing the forest through the twigs. Apple has brand strength that persists through upgrade cycles that competitors do not have.

See any lines outside a Samsung store lately? And quietly, that loyalty is extending to computers: IDC data shows sales growth of 7.4% for Macs last year, the only personal computer company to see growth.

What’s in the Apple pipeline?

Upside catalysts in 2013 include a possible deal with China Mobile, an iPhone 5S, a lower-cost iPhone and perhaps a real Apple TV device.

The stock is seen by many as dead money at best. Trust me, I know – after having ridden AAPL for a while, then selling, I got back in around $620 – and still have more than three-fourths of that position staring me in the face every morning.

But I am a long-term investor and I find the math of Apple compelling. From continuing sales growth — iPad sales grew 48% in 2012, the Mac is the only computer taking market share — to overpowering financials, all wrapped in the power of the brand, Apple is the still the finest company on the planet.

Longer term[4], based on the low end of analysts’ growth estimates, the enterprise value of the stock, margins and profitability the stock is worth $1,080-$1,240 a share.

This article was written by Michael Shulman for Traders Reserve.

Endnotes:
  1. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  2. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  3. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY
  4. Longer term: http://investorplace.com/2013/04/apple-can-be-500-again-if-and-but-gs-aapl-goog-msft-amzn/

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