Over the past year, Apple Inc. (AAPL) has struggled on Wall Street as investors questioned whether the tech giant’s heyday was behind it. Apple stock has declined more than 20 percent over the past year, with shares trading below $100.
While many have sold their shares amid worries that Apple’s time at the top is over, long-term traders would be wise to snap up AAPL stock before it makes its comeback in just a few short months.
It’s Not as Bad as You Think
The major reason Apple stock has declined has been poor iPhone sales data. This year, the company’s iPhone sales declined for the first time ever.
This is a big problem as iPhone sales make up more than half of the company’s revenue, but it is unlikely that this year’s trend is the beginning of the end.
A decline in sales is never a good sign, but it’s important to consider that Apple’s 2015 figures were exceedingly high, so the decline was exacerbated by the year-over-year comparison.
Worries about the decline in iPhone sales are overdone — while sales dropped, the number of customers who switched from an Android phone to buy the iPhone 6 actually increased. In terms of dollar signs, this doesn’t make much difference, but in terms of future growth and expansion, converting customers and gaining market share is a big deal.
Apple users tend to be fiercely loyal, with 90 percent of them sticking with the company when they upgrade.
Apple Stock Is Incredibly Undervalued
If you don’t believe that Apple’s most recent iPhone sales figures are a sign that the firm has fallen off a cliff, then AAPL stock is most certainly a buy right now.
It’s unlikely to stay below $100 much longer, and with a price-to-earnings ratio of only 10.9, now is one of the few times investors will be able to own such a sturdy company at a bargain price.
Apple has a long history of solid dividends and share repurchase programs, and with very little debt and a boatload of cash, investors can expect to see buybacks and dividend hikes in the years to come.
What About This Rally?
It’s difficult to say with certainty when Apple stock will make its comeback, but many expect to see a surge ahead of the September release of iPhone 7.
In the past, AAPL has mostly outperformed in the weeks leading up to new product launches, so it’s likely that the stock will see a bump in the coming months.
There is some talk of the iPhone 7 seeing muted demand, as it isn’t expected to offer any vast improvements over previous models. This could mean that investors will have to wait a bit longer to see any substantial gains, but 2017 marks the 10-year anniversary for the iPhone and Apple is expected to celebrate in a big way.
Apple is rumored to be working on making major improvements to its handset for the 2017 release of iPhone 8. Analysts are speculating that the new device could offer everything from a curved screen to wireless charging, and the buzz surrounding the device is expected to be huge.
The Bottom Line
Apple stock has been punished in recent months, but worries about the company’s staying power are overblown.
True, Apple may not be the growth engine it once was, but the likelihood of iPhone sales falling dramatically every quarter is low. Not only will the stock see a lift ahead of the release of this year’s handset, the firm is expected to make a major comeback in 2017 with iPhone 8.
While this may sound like a long time to wait, investors who buy in now get to enjoy a 2.3% dividend yield.
Buying AAPL stock now is a no-brainer, the firm’s solid financials and future potential make it a long-term investor’s dream, especially at current valuations.
As of this writing, Laura Hoy was long AAPL.
