Is Apple’s Dip a Buying Opportunity?
It was the first time in over a decade that I had done this.
It felt weird.
My wife even questioned my decision, and it confused my kids.
See, since I bought my first Apple product in 2007, I haven’t looked back.
Every device I’ve bought for my family or myself that falls into an Apple product’s category, I have went with Apple.
We have iPhones, iPads and Mac computers.
An Apple Watch, Apple TV and HomePod too.
Clearly, I’m a bit of an Apple fan.
But about a month ago I went with my first electronic device that wasn’t an Apple product.
I bought the Microsoft Surface.
My decision told me more about Apple than I thought. And it has major implications for the stock.
Let me explain…
Apple’s Sticky Ecosystem
Making my first switch out of the Apple ecosystem wasn’t easy. But Apple simply doesn’t have a comparative product.
I bought the Surface because I wanted the same applications I run on my work desktop. Apple doesn’t offer this.
When my Surface arrived, I started to download some programs to get it all set up.
But the first item I downloaded somewhat surprised me. It was iTunes.
That’s Apple’s library of music and video content. This is where all of the music and movies I own exists.
It shows that what Apple has done with its line of products is build more than great devices. It has built a sticky ecosystem that consumers are used to.
My experience is part of the reason I think Apple’s stock is a great buying opportunity today.
But when I dive into the stock, I find many more reasons to be optimistic.
Apple Isn’t Just “the iPhone Company”
Apple’s stock has lost a quarter of its value after it hit the highly watched $1 trillion level in its market cap.
The key driver behind the stock’s decline was in Apple’s latest earnings report. Amid sluggish iPhone sales growth, the company said it will no longer break out iPhone sales from other products.
Analysts like to be laser-focused on products like the iPhone. It lets them review suppliers of the parts that go into it to get details on what Apple will produce.
But Apple knows the sheer number of iPhone sales is slowing. It’s why it is shifting focus from it to its entire portfolio of products.
And this is great news for Apple.
Apple is so much more than “the iPhone company” at this point.
The iPhone was like a gateway drug. It brought in more Mac users, led consumers right into the iPad and created a must-have accessory in the Apple Watch.
The seamlessness of its products and the excellent user experience is why the company has fans like me.
If Apple pushes into a new product category, like self-driving cars, augmented reality or a deeper dive into consumer health, those consumers will be there to scoop it up.
But with the adjustment to the way it reports sales, look for analysts to finally focus on the No. 1 reason to like the stock — its cash.
Endless Possibilities for Apple
Apple has an enormous amount of cash in its balance sheet.
As of last quarter, it had nearly $250 billion.
To put that in perspective, Netflix Inc. (Nasdaq: NFLX), the video streaming giant, is worth about $115 billion.
Tesla Inc. (Nasdaq: TSLA), the groundbreaking automotive company, is worth $60 billion.
Yet not enough analysts and investors consider the possibilities that Apple’s cash position gives the company. It could buy either of those companies to dominate a completely different industry than electronics.
Apple is already spending money to create original television content. An acquisition of Netflix would accelerate that ambition for Apple.
And Apple is reportedly working on an operating system for self-driving cars. A Tesla acquisition would give it an asset that’s known as the pioneer of the renewable energy and self-driving technology sectors.
I don’t think Apple will buy either of those companies, to be honest. But with $250 billion sitting in cash, the possibilities are clear — Apple could dominate another explosive growth industry whenever it chooses.
It’s just a matter of time before it either makes an acquisition or announces a major new product.
And when it does, you won’t want to be miss out on Apple’s gains.
Use this dip to buy the stock.
Chad Shoop, CMT
Editor, Automatic Profits Alert