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Is Apple Inc. (AAPL) Stock Still Cheap?

AAPL stock has the power of corporate performance behind it, but can it still draw in value investors?

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I was looking over the results of the latest Apple Inc. (NASDAQ:AAPL) earnings report, and the numbers were pretty darn amazing. I am moving toward a conclusion that AAPL stock is increasingly attractive despite the fact Apple appears to no longer be a computer company, but more of an enhanced tech lifestyle company.

Is Apple Inc. (AAPL) Stock Still Cheap?
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First, though, we have to put the numbers into context.

Apple’s Fiscal Q3 Results

Apple earned $1.67 per share in its fiscal third quarter, up 18% from last year’s $1.42 in profits and better than expectations of $1.57. However, on a straight-up net income basis, earnings rose 13% to $8.72 billion. In other words, that per-share number benefited (as always) from a lot of repurchases of AAPL stock; share count was reduced by almost 5%.

This came on a 7.5% revenue increase to $45.4 billion. Analysts were expecting a top line of $44.9 billion.

Apple moved more than 41 million iPhones, and this might be the most important number of all.

The narrative heading into third-quarter earnings was that consumers were waiting for the iPhone 8 before purchasing a new smartphone. It’s what Tim Cook blamed weak fiscal Q2 results on, after all. But these fears appear to be more myth than fact.

By the way, inventory fell by over 3 million units. What retailers wouldn’t love to see an inventory decrease on top of an increase in sales? This also translates to iPhone representing about 55% of revenue, down from 70% or more, so that comes as a relief.

The good news is that sales aren’t flagging. That means iPhones provide the backbone of the business, generating tons of free cash flow, and providing a kind of razor for the razor-and-blade analogy of the early Gillette model. I prefer to think of it more as a Trojan Horse. Sell a nifty, pricey, essential product and build other revenue sources around it.

Still, though, there hasn’t been growth in iPhone sales. More on that in a second.

Other Pleasant Surprises

Apple surprised everyone on another level: iPad sales. The product had not seen YOY increases in this product for quite some time, but in Q3, iPad sales leaped about 25% to 11.4 million units sold.

Apple Services is what really surprised me the most. I think it is now safe to say that Apple is on to something here.

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