It’s summertime, and that typically means legions of Apple Inc. (NASDAQ: AAPL) fans are worked into a lather about the latest iPhone launch. Since 2007, there has been a snazzy new Apple iPhone released between mid-June and mid-July. But this year, the iPhone 5 release date has been pushed back to September.
That’s the bad news. The good news is that the Apple iPhone 5 release will supercharge the speed of the device, jazz up the camera and adding other bells and whistles. That should make the wait worth it to many iPhone 5 buyers – and could signal that this summer may be a big buying opportunity for investors as Apple stock hits a funk.
First, the details on the new Apple iPhone 5: According to insider reports compiled by Bloomberg, the new iPhone 5 will boast an A5 processor. That’s the same chip Apple uses to power the iPad 2 – putting the smartphone on par with tablets when it comes to performance. That’s quite an aggressive move from Apple, and one that further blurs the lines between smartphones and conventional computers as we know them.
Another big development is a the inclusion of an 8 megapixel camera, compared with a 5 megapixel camera in the previous iPhone. On top of that, the iPhone will boast a higher resolution display. Clearly Apple is trying to make its smartphone’s picture functionality more than just an afterthought, but a feature that can compete with many digital cameras.
Investors should take note. While the iPad has gotten a lot of attention and the recently unveiled iCloud programming has techies all atwitter, the iPhone remains Apple’s top seller and accounted for half of the companies nearly $25 billion in revenue last quarter. Even a modest uptick in iPhone interest will mean big things for Apple stock.
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What’s more, against all odds Wall Street seems to be doubting the darling stock. Shares of Apple are up less than 2% so far in 2011, less than half of the broader stock market, and have lost over 5% since May 1. This is after a red-hot return of more than 53% in 2010, nearly five times the performance of the Dow Jones Industrial Average.
Some experts claim Apple has been overbought, and it appears many investors agree based on the recent roll-back in prices. But in my opinion, there has never been a better time to buy Apple.
Consider this: Though Apple’s price target was technically reduced by Oppenheimer this week, the firm maintained is “outperform” rating and cut its long-term target from $450 to $430 a share. Shucks, that’s only a 33% gain… what ever would investors do with such meager returns? What’s more, Morningstar recently added Apple to its exclusive list of five-star stocks with a target of $475 – about 52% above current valuations.
Those high targets are the result of a host of data proving Apple’s strength. Consider that last quarter it beat earnings expectations by a jaw-dropping $1.00 a share. Or that it’s forward price-to-earnings ratio is about 11.4 – far from the nosebleed valuations for other trendy tech stocks like Netflix
(NFLX), which boasts a forward P/E north of 38, or Amazon.com (AMZN) which is hovering around 50.
The list goes on – read a complete article on why buying Apple stock is free money now.
It’s worth noting that Oppenheimer’s price target reduction was due to the late release of the iPhone this year. There’s no doubt the loss of a few months of sales for its flagship phone will take a big bite out of Apple’s total revenue in 2011. And for those who are into charts, Apple technical analysis shows the stock may continue to see headwinds in the short term.
But if the flashy new features of the iPhone are a hit, it could find dramatic demand that makes up for any late release date – and investors who buy now will be richly rewarded.
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.
