Apple (NASDAQ:AAPL) continues to face uncertainty about its future. Apple stock plunged in May as the government threatened to take antitrust action against Apple and mega tech peers such as Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB).
The stock has mostly recovered from that threat. However, AAPL still trades at almost 17% below its 52-week high as the company faces a need for new growth engines.
Until it can find a more defined direction, investors should wait for a pullback before buying Apple stock.
A Closer Look at Apple
First of all, I still expect AAPL stock to perform well long-term. It trades at a price-to-earnings (PE) ratio of about 16.2. That only comes in slightly above the five-year average PE for Apple of about 15.5. Once the predicted double-digit earnings growth resumes next year, the stock should resume its growth.
However, the present appears less rosy. Profit forecasts fell last year. As a result, Wall Street predicts earnings will fall by 3.9% for fiscal 2019. The iPhone, which had made up a majority of the company’s revenues in recent years, now appears destined for a permanent decline. The company has turned to other initiatives, such as the Apple Card and the Apple TV Streaming Service.
Apple holds enough cash to compete with the largest banks, Netflix (NASDAQ:NFLX), or most any titan in any industry. As long as these business lines earn a profit, it should serve a specific group of AAPL stock investors well.
It will help the kind of investors who want low-double-digit growth, an annual dividend increase, and a steadily rising stock price, AAPL should accomplish that.
Even better, that stands as the likely worst-case scenario. As Dana Blankenhorn mentioned, Apple’s embracing innovation by fashioning the Apple Watch as a medical device. If it offers the heart and diabetes monitoring which many hope could become the company’s next great revenue driver.
Wait for More Bad News
Investors should wait for bad news like the recent antitrust probe into the company. This took the Apple stock price to a low of around $170 per share in early June.
Investors should remember that the company pledged to spend $75 billion on stock buybacks this year. Perhaps that helped to foster a recovery in AAPL. However, with AAPL rising to over $194 per share in just two weeks, they missed that one opportunity.
Still, traders should not fret over this missed opportunity. For one, if the antitrust talk heats up again, AAPL stock will likely fall. Moreover, the state of Apple will remain in uncertainty until one of its new lines of business begins to drive revenue growth. Hence, any news that drives uncertainty or an economic downturn could have Apple stock selling at sale prices.
The bottom line on AAPL stock
AAPL stock remains a long-term buy, but investors should wait for bad news before adding to positions. Right now, Apple bears have focused on possible antitrust action or the drop in iPhone sales. Investors continue to wait as Apple scrambles to develop revenue sources which will bring earnings growth back to the company.
However, Apple continues to enter into established industries. That by itself will drive some level of growth that will please more conservative investors.
Additionally, if Apple can find success in its medical device applications, it not only ensures the long-term success of AAPL stock, but it also brings innovation to a company that has not introduced any significant original products since the passing of Steve Jobs.
In the meantime, significant pullbacks should allow investors to buy AAPL stock at a sale price. With a little patience, investors can then benefit finds the next success that further enriches Apple investors.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
