When considering an investment in Apple (AAPL), it’s tempting to let emotions takeover. That’s because it’s hard to think of another company, or stock, surrounded by so many disparate feelings. AAPL stock is divisive to say the least.
On the one hand, I know people who love the Apple iPhone and other AAPL products to the point that they would never entertain the idea of choosing another company for their personal technology needs. I also know people who despise the whole Apple “cult” element, and who won’t buy Apple products or AAPL stock regardless of the merits.
I consider myself an objective and neutral observer in this realm. While I do own products such as the Apple iPhone and iPod, I haven’t completely bought into the all-things-Apple concept. As an investor, I have owned AAPL stock at various price points throughout the years, and most of my stints as an Apple stock owner have been outstandingly profitable ventures.
Right now, though, I have no position in AAPL stock … but should that change? Is Apple stock a must-own right now, or are there compelling reasons to stay on the sidelines? Here are three pros and three cons to snatching up AAPL stock now.
Pros on AAPL Stock
Atop Christmas wish lists. As part of my annual holiday retail research, I do an informal poll of what the must-have Christmas gifts are each year. Atop most wish lists of people I know? The new gold Apple iPhone 5S, and the new Apple iPad Mini with Retina Display. I suspect both of these items are going to be the hot ticket among technology buyers this holiday season, and that likely means a strong fiscal Q1 when AAPL reports results on Jan. 23.
Apple TV. I recently had lunch with a portfolio manager who is admittedly a big Apple stock fan. When asked about what aspect of AAPL he was most excited about, he didn’t hesitate to say it was the potential game-changing nature of a rumored new version of Apple TV. Although not yet a reality, the smart money is betting that the next generation of Apple TV will offer subscribers a commercial-free TV experience designed to rival streaming service Netflix (NFLX) … but with all of the bells, whistles and integrated applications Apple is known for. That could definitely drive AAPL stock higher over time.
Click to EnlargeA bullish technical base. From a technical perspective, AAPL stock has been forming a solid base here at the $520 level since mid-October. While Apple stock failed to continue the upward momentum it experienced off its September lows, it also didn’t lose ground after its Q4 earnings release in late-October. If the company logs strong holiday sales, as I expect it will, then this $520 level could be the next launching point for a move back to $700 mark that AAPL stock vaulted to just one year ago.
Cons on AAPL Stock
Tempered forecast. Despite optimism in some circles over Apple’s holiday sales, there are others who remain less-tha-impressed with the AAPL forecast going into fiscal Q1. According to the company’s own forward guidance, Apple expects sales of $55 to $58 billion, and gross margin of 36.5% to 37.5%. That low-end target is below AAPL stock analyst estimates for $55.7 billion in sales and gross margin of 37% to 38%.
Innovation and competition. Perhaps the biggest fear for Apple stock investors is what many see as a lack of innovation due to the loss of visionary CEO Steve Jobs. Sure, AAPL still has a bevy of big brains designing gadgets, writing code and marketing its products worldwide. But the big worry is if this talent be enough to keep Jobs’ legacy going. As for competition, this year we’ve seen a serious chink in the Apple iPhone and iPad armor from rival Samsung and its Google (GOOG) powered Android operating system.
Stagnant momentum. While AAPL stock may currently be forming a bullish base, there is a chance that base could fail, particularly if those all-important holiday sales metrics fail to impress. Given the somewhat stagnant upward momentum in the shares, Apple stock could be ready to sell off hard on any hint of bad news.
Verdict on AAPL Stock
When it comes to Apple stock, and just about any stock for that matter, the notion to buy should always come down to personal goals and your personal time frame.
If you want to invest in, and actually own, a company with one of the best-known brands, a cult-like following, a stellar record of strong sales and earnings and the potential for continued massive growth over the long term … well … the pros here in AAPL stock definitely outweigh the cons. But what if you are looking to catch a big spike in shares before good news sends AAPL stock on another leg higher? Well, then I also think that the current pros outweigh the cons in Apple stock.
So, the verdict here for both the short- and long-term money? Buy AAPL stock now.
At the time of this writing, Jim Woods did not hold a position in any of the aforementioned securities.