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Why Apple ( $AAPL ) Stock Is A Buy Ahead Of Its September Event

Why Apple (AAPL) Stock Is A Buy Ahead Of Its September Event



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Yesterday, Apple (AAPL) sent out invitations to an event to be held on September 12 at the Steve Jobs Theatre in Cupertino. There was no mention in the invitation of any product unveiling, but the timing suggests that it will be for the launch of new, updated iPhones. As a result, the rumors as to what will be unveiled that have been circulating for some time have reached fever pitch.
The guessing game as to what we will see is fun in some ways, but for long-term Apple investors it is as good as irrelevant. What matters in that context is that AAPL will probably react positively to the news and is, even at these levels, still cheap.
That tendency was particularly pronounced last year, when the iPhone X was seen by many people as way too expensive to be a hit.
At that time, I said in this article that the drop to around $149-$150 that followed the launch event was a buying opportunity. As you can see from the above chart, that wasn’t a bad call. What is different this year is that it may not pay to wait for a post-event drop, as it may not materialize.
In these days of computerized trading dictated by algorithms, it is easy to forget that the big trading and investing decisions that really move markets are made by human beings and are therefore influenced by the tendencies and biases that we all share. One of those is what is known as “recency bias,” the logical fact that recent events have the biggest influence on what we do.
As a novice in a dealing room I was told by my first boss that I could make every mistake in the book once, but repeating an error was a firing offense. I am sure not every trader is told that in such blunt terms, but those that last in the job tend to be those that learn from their mistakes. Underestimating Apple’s ability to market a thousand-dollar phone last year, and selling the stock as a result, was a mistake, so whatever the reviews of this year’s products the likelihood is that the market will react positively in the coming weeks.
That is a good short-term argument for buying AAPL, but the long-term case is if anything more compelling. Despite displaying an ability to post continued growth that is arguably the most impressive in history, Apple is still valued by the market as a company that has hit its ceiling.
The average P/E ratio for the S&P 500 right now is over 24, while AAPL is trading at around 20x trailing earnings, a 20% discount to the market. In part that is no doubt because achieving meaningful growth in percentage terms is hard when your market cap is over a trillion dollars, but that is just a number. Apple has shown to this point that it can be massive and continue to grow and until that changes, betting against them is not very smart.
As September 12 approaches, you can expect more and more rumors, some fanciful and some accurate. It is even reasonable to assume that as usual, the products that are revealed will meet with some skepticism from some critics. None of that, however, should put you off holding on to, or even buying AAPL.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


This article appears in: Investing , Investing Ideas , Stocks , Technology
Referenced Symbols: AAPL