Things have turned up for Apple (AAPL), and investors have reacted very positively. I mentioned during the InvestorPlace “Get In” roundtable back in December that I needed to see some margin improvement before I’d get hot on AAPL stock … and that’s just what we’re seeing now.
Bottom line: Apple is a screaming buy at its current price.
Margins for Apple’s quarter ended March 310 were well above analyst expectations and surpassed last year handily. Gross margin was 39.3% compared to 37.5% in the year-ago quarter. Apple surpassed expectations on all fronts — earnings of $11.62 a share on revenue of $45.6 billion, well above Wall Street’s expectations of $10.18 and $43.53 billion. Apple also announced a 7-for-1 AAPL stock split that’s effective for shareholders of record June 2 and will trade adjusted for the split of June 9.
Apple had an excellent quarter all the way around. It sold 43.719 million units, up 17% from the year-ago period and a new record quarter for the company. Sales of the iPad fell a little more than expected but still came in at 16.35 million units. In spite of what some might call weak tablet sales, Apple still has a 47% market share in the U.S. and is seeing strong demand from the emerging markets.
Apple continues to be very friendly toward shareholders as they boosted the AAPL stock dividend to $3.29 and promised to revisit the payout every year; Apple will likely increase its dividend regularly. Apple increased its share buyback plan to $90 billion through 2015 and will probably finance that program with what could be the largest corporate bond offering in U.S. history. Apple continues to take advantage of low interest rates by keeping its cash overseas and using the bond market to finance dividends and stock buybacks.
On the earnings call, Apple CFO Peter Oppenheimer said:
“We generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases during the March quarter. That brings cumulative payments under our capital return program to $66 billion.”
Apple is firing on all cylinders right now. There is solid demand for Apple’s products and it continues to dominate the app marketplace for smartphones and tablets. Apple is gaining ground in emerging markets — particularly China — and the company has new phones and iPads on the drawing board for release in the not-too-distant future.
These improvements haven’t been missed by Portfolio Grader. Our stock-screening toll upgraded AAPL stock to a “B” back in March — and this most recent excellent quarter has Portfolio Grader upgrading AAPL shares to our highest rating of “A.” Apple is a strong buy at the current price.
Louis Navellier is the editor of Blue Chip Growth.