There was a lot to like in Apple Inc.‘s (NASDAQ:AAPL) Q1 numbers reported this week, but it seems the Street is yawning at the results. Or Apple’s recent numbers were strong but not strong enough to get analysts excited. Or AAPL stock already had the massive quarter built into its price.
Whatever the reason, it doesn’t change the fact that AAPL continues its path as the consumer tech juggernaut.
Apple is now sitting on $194 billion in cash and investments. That’s bigger than Microsoft Corporation‘s (NASDAQ:MSFT) and Google Inc‘s (NASDAQ:GOOG) cash piles…combined.
Apple’s cash can be a double-edged sword for investors.
On one hand, sitting on that enormous pile of cash and investments is not the purpose of a business. People looking to retire tuck money away for their retirement, but companies don’t retire — at least not willfully.
Companies should have a prudent amount of reserves for acquisitions or downturns but should be deploying its assets, growing the company, investing in research and development, moving into AppleTV or making some major acquisitions to expand the brand.
The reason AAPL has so much cash is precisely because MSFT and GOOG are constantly acquiring, expanding and experimenting.
On the other hand, Apple has bumped up its AAPL stock buyback program from $90 billion to $140 billion and is boosting its dividend 11%.
Both these moves are very friendly toward shareholders and Wall Street. AAPL is now the largest dividend-payer in the world, surpassing Exxon Mobil Corporation (NYSE:XOM) with its recent boost, according to Howard Silverblatt of S&P Dow Jones Indices.
And AAPL is 62% institutionally owned. So, those dividends aren’t getting kicked over to your average investor as much as adding value to blue-chip stock portfolios of financial services firms — which isn’t a bad thing. AAPL knows how to make these investors happy.
As for growing the company, it’s hard to argue that AAPL isn’t making a big move into Asia in general and China in particular. Much of this quarter’s sales increase came from China for Apple.
AAPL sales in China were up 71% — fueled predominantly by the iPhone 6 and helped by the massive gift buying that goes on for Chinese New Year.
Amazingly, iPhone 6 sales were up 40% from the year ago quarter at 61.2 million units but actually down from the enormous Q4 holiday buying.
When Steve Jobs was CEO, Apple had been on a multi-year tear, beating expectations quarter after quarter, year after year. When Tim Cook took the reins, the streak of perfectly managed expectations broke but is back on track now.
But not all the numbers were headline grabbers. AAPL sold fewer iPads than expectated — 12.6 unites versus 13.9 — and Macs came in slightly below expectations as well at 4.6 units. Even Apple’s pile of cash was a bit lower than expectations.
Bottom Line
The Apple train keeps on rolling and continues to be a great ride.
However, also important to note is that one day, when this party stops, everyone is going to head for the exits very quickly. No matter how much of a darling Apple stock is to Wall Street and individual investors, nothing lasts forever. When things start to turn, take your profits and look for the next AAPL.
For now, however, just root for the iPhone 7.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
