A few months ago, as part of the Best Stocks for 2015 contest, I offered my prediction that 2015 would be the year of the stock buyback, and that Apple Inc. (NASDAQ:AAPL) would lead the charge on this powerful trend.
And according to TrimTabs Investment Research, corporate stock repurchases surged to $104.3 billion in February, and 123 new buyback programs were announced. While the March numbers haven’t been released yet, I expect this trend to continue.
With the stronger dollar weighing on international sales, many U.S. companies are buying back their stock at a frantic pace to help prop up earnings per share.
Now, where does this leave Apple, which is in the middle of a massive $90 billion stock buyback program itself? Won’t the stronger dollar hurt its bottom line, considering that 62% of Apple’s net sales originated from outside of the U.S.?
Not necessarily. The fact is that Apple has enviable pricing power. When foreign currencies weaken against the dollar, Apple can hike up the cost of its products, and consumers will still buy them. Last winter, Apple increased iPhone prices by 69% in Russia after the Ruble plunged. Even with the price increase, iPhone sales surged to $827 million last quarter in Russia, reaching a record 46% market share.
As for the rest of the world, Apple brought in record revenue from iPhone, Mac and App Store sales last quarter. Notably, Apple sold 74.5 million iPhones, up 46% from a year ago, and trouncing analysts’ expectations of 66.5 million iPhones.
AAPL Stock Outlook
For the current quarter, analysts are calling for 21.4% annual sales growth and 27.7% earnings growth. Even better, the consensus EPS estimate has jumped from $1.99 to $2.13 in the past 90 days, which suggests that Apple will once again beat expectations when it reports near the end of April.
Looking further ahead, Apple is releasing the Apple Watch on April 24 in nine countries. The smartwatch is billed as a customizable timepiece that offers iPhone users a new level of connectivity, fitness tracking and even payment options. In addition, Apple has unveiled its new MacBook with an ultra-thin Retina display and full-sized keyboard. Finally, Apple has a new agreement with HBO to offer its programing directly to Apple customers. So Apple fans have plenty to look forward to over the next few months.
The bottom line is that AAPL stock is in much better shape than the rest of the market. This earnings season, most of the S&P 500 is going to have to face the music. For the first time since Q3 2012, the S&P 500’s first-quarter earnings are expected to decline compared with Q1 2014. That’s because nearly half of the S&P 500’s sales come from outside of the U.S., and the strong dollar is hindering these sales.
As for Apple, it can raise prices in response to foreign currency fluctuations, and people will still buy its products. So the company is one of the few that is still growing sales and earnings in this tough environment. Quite frankly, I’m surprised that AAPL stock is trading at just 13 times its forecast earnings.
And when you factor in its $130 billion capital return program, which goes towards Apple’s 1.5% dividend and its stock buyback program, it really is a no-brainer. AAPL stock is an excellent buy for 2015.
Louis Navellier is the editor of Blue Chip Growth.
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