Why the Recommendation for
an Apple Options Call Trade?
There are many catalysts that should be
mentioned to understand the breakout reasoning.....
The Major Catalysts for
tend to outperform the broader market over long periods. The Nasdaq-100
Technology Sector has outperformed the S&P 500 and the Dow Jones
Industrial Average handsomely over several years.
This is not
surprising as companies operating in the technology space can create disruptive
products and services that can give birth to entirely new market and revenue
opportunities. Additionally, several hot trends could fuel long-term upside in
of fifth-generation (5G) wireless networks, for instance, has supercharged
companies such as Apple that were earlier struggling to find growth. Apple's
annual iPhone sales hit a peak back in 2015, after which the company's
shipments plateaued and eventually declined. But its fortunes have now changed.
The 5G-enabled iPhone 12 has given Apple's customers a solid reason to upgrade
and sent the company to the top of the smartphone sales rankings.
commands 30% of the 5G smartphone market and is expected to set new sales
records this year. What's more, the 5G smartphone market is expected to grow
five times by 2025 as compared to last year, paving the way for long-term
growth at Apple. Not surprisingly, Apple's projected earnings growth of 18% a
year for the next five years is more than double what it has clocked in the
past five years.
2. Competitive Advantages.....
possesses considerable competitive advantages due to its world-renowned brand,
immense financial resources, and an army of top tier engineer and artist
employees. They will likely continue to fuel innovation and enable Apple to
continue capturing the fascination of consumers.
the Price to Forward Normalized Earnings looks pretty reasonable at 24.31x
compared to the S&P 500’s forward Price to Earnings ratio of 21x. It
actually looks cheap when you consider that U.S. long-term interest rates
remain extremely low at just 1.63%.
AAPL is one
of the strongest companies in the world and – aided by aggressive share
buybacks and heavy investment in innovation – its earnings-per-share growth
rate is likely to come in at ~10% on average for the foreseeable future.
3. Talks With Chinese Manufacturers…..
Apple is in
talks with Chinese manufacturers for a car battery factory in the U.S. The
company seems to be gradually working towards its first electric vehicle.
giant is holding early discussions with China’s Contemporary Amperex Technology
(SZ:300750) and electric vehicle maker BYD regarding the supply of batteries
for its upcoming EV.
exploring use of lithium iron phosphate batteries in its planned electric
vehicle because they are cheaper to manufacture compared to those that use
nickel and cobalt.
CATL is the
world’s largest lithium-ion battery manufacturer and plans to build a new major
car battery plant in Shanghai.
also witnessed strong growth in the wearables and services segment. Besides
strong top-line growth, revenue is more diversified. At the same time, iPhone
sales are likely to remain robust with 5G being a key growth driver.
glut also implies sustained value creation through share repurchase and
possibly higher dividends. Of course, the cash buffer gives the company ample
headroom to invest in product innovation and possible acquisitions.
strong growth sustains, it’s too risky to short AAPL stock. On the contrary,
current levels look attractive for considering some long-term exposure.
2020 (ended Sept. 26, 2020), the company's wearables, home, and accessories
segment grew 25% compared to 2019, generating a record $30 billion and
accounting for more than 11% of Apple's total revenue. Not only that, but the
segment ended the year on a high note, with each product category -- wearables,
home, and accessories -- generating record sales. Apple noted at the time that
its "wearables business is now the size of a Fortune 130 company."
past six months, growth in the segment has accelerated. Wearables, home, and
accessories revenue climbed nearly 28% year over year, led by strong demand for
AirPods, AirPods Pro, and Apple Watch.
announced in early 2017 that Apple was aiming to double its services revenue by
the end of 2020. In July 2020, he revealed that Apple had achieved that lofty
goal a full six months ahead of schedule.
is off to a quick start in 2021. For Apple's fiscal 2021 second quarter (ended
March 27, 2021), the services segment posted all-time record revenue of $16.9
billion, up nearly 27% year over year, and marking the fastest rate of growth
in more than two years.
were driven by 660 million paid subscribers across Apple's services segment,
which includes Apple TV+, Apple Music, the App Store, and iCloud, among others.
CFO Luca Maestri said that the company's video, music, games, and advertising
businesses all had a record-setting quarter. The segment represents roughly 19%
of Apple's total revenue -- even with the recent surge in iPhone sales.
video streaming, news and gaming services are expected to benefit from Apple’s
strong installed base. Moreover, its wearables and hearables businesses are
expected to be driven by solid demand for Apple Watch and Airpods.
Additionally, strong demand for 5G-enabled iPhone is a major growth driver.
Cupertino, CA-based company currently has more than 660 million paid
subscribers across its Services portfolio. The App Store continues to draw the
attention of prominent developers from around the world, helping the company
offer appealing new apps that drive App Store traffic.
growing number of AI-infused apps will attract more subscribers on the App
Store. This company’s Apple One bundled plan is expected to drive Services
7. Innovation and the Ecosystem.....
Apple has a
reputation for being an innovator. But there were portable music players, smart
phones, and tablet computers even before its well-known products. What has been
most revolutionary is how the company was able to drastically improve the user
experience and weave the products into an ecosystem. For its customers, those
products are now everywhere they turn as they live their lives -- and they are
all integrated with each other.
installed base of devices, Apple has expertly moved into services offerings. In
addition to the App Store, products like iCloud, Apple Music, and Apple Pay
make it easier and easier for customers to spend more money with the company.
In fact, services made up 18.5% of total revenue over the past 12 months. That
number was only 11% in 2016. The higher mix of services isn't because product
revenue is stagnating. Far from it.
overall revenue has climbed almost 51%. iPhone, iMac, and iPad have all grown
respectably. The services category has impressed, with 147% growth. However,
it's the wearables category that has grown the fastest. Sales in that segment
are up 216%, going from $11 billion to $35 billion over that time.
those categories is important because the wearables and services make the
devices much stickier -- customers are less likely to switch. In essence, it
makes buying an Apple device a lifestyle choice instead of just a transaction.
The continued success has allowed the company to give a lot of money back to
shareholders. It's that capital return program that makes the stock a great fit
for a tax-advantaged Roth IRA.
is benefiting from continued momentum in the Services segment, driven by strong
App Store sales and robust adoption of Apple Music and Apple Pay. Non-iPhone
devices, particularly Apple Watch and AirPod, are the other notable drivers in
the long haul.
focus on autonomous vehicles and augmented reality/virtual reality technologies
presents growth opportunity for the long term. Apple has been transforming
itself from a basic hardware company to a software services company.
are also expected later this year, while an Apple Car is also in process.
made no secret of his love of Apple, saying "It's
probably the best business I know in the world." He's gone even
We bought about 5% of the company.
I'd love to own 100% of it. ... We like very much the economics of their
activities. We like very much the management and the way they think.
That's nothing less than a ringing
endorsement from one of the world's most successful investors.
As of June
2021, he has a net worth of over $109 billion. Buffett runs Berkshire Hathaway,
which owns more than 60 companies. He believes in the value-based investing
model and only invests in the stocks that exhibit solid fundaments, strong
earnings power, and the potential for continued growth.
As of Q1
2021, Buffett’s stock portfolio is composed of 48 stocks and its value
increased marginally from $270 billion to $270.4 billion.
remains the biggest stake of Buffett, accounting for 40% of Berkshire’s entire
Q1 portfolio. The fund owns 887.14 million shares of the company, worth $108.4
billion. This huge stake reflects the confidence Berkshire has in Apple whose
stock is up over 400% in the last 5 years.
touch a $3 trillion market capitalization in 2022, according to Wedbush analyst
Dan Ives, as quoted on CNBC. Apple has a market cap of over $2 trillion,
currently. It topped $1 trillion mark in 2018 and the $2 trillion
threshold in 2020.
“We think ultimately 12 to 18 months
from now,” Ives told
‘Street Signs Asia’ when asked about a possible timeline to the next milestone.
Apple is the
world’s most valuable company, with a market cap of around $2.11 trillion.
Ives has a
target of $185 for the Apple stock, an approximately 27% upside to its current
price of $126.77.
values Apple’s software services business at about $1 trillion and sees it
about $1.5 trillion under the $3-trillion valuation scenario.
Apple has also been the subject of a
number of other research reports.....
Crespi & Hardt upped their price objective on Apple from $170.00 to $180.00
and gave the company a “buy” rating in a research report on Thursday, April
Bank Aktiengesellschaft upped their price objective on Apple from $160.00 to
$165.00 and gave the company a “buy” rating in a research report on Thursday,
Stanley upped their price objective on Apple from $158.00 to $161.00 and gave
the company an “overweight” rating in a research report on Monday, April 26th.
& Company LLC restated a “buy” rating and issued a $170.00 price objective
on shares of Apple in a research report on Wednesday, April 21st. F
- Finally, New
Street Research downgraded Apple from a “neutral” rating to a “sell” rating and
set a $90.00 price objective on the stock in a research report on Friday, May
have rated the stock with a sell rating, seven have issued a hold rating and
twenty-six have issued a buy rating to the stock. Apple presently has a
consensus rating of “Buy” and a consensus target price of $157.58 putting the
upside potential at 25.17%.