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Is Apple A Good Stock To Buy Now
Apple's (AAPL 1.56%) incredible financial strength has allowed it to weather the current bear market better than many other tech stocks. Yet its shares are still down about 17% year to date. The tech titan, in turn, has lost a staggering $500 billion in market value.
is apple a good stock to buy now
Together, these devices and services form a vast ecosystem that tends to be quite sticky. Once a person buys an Apple product, they tend to remain a loyal customer. This is why investors are increasingly viewing Apple as a utility-like business -- one with dependable, recurring revenue and reliable cash flow. Like the best utility stocks, Apple is rewarding its shareholders with a steadily rising dividend stream and bountiful stock buybacks, both of which help to bolster its share price.
Moreover, Apple's robust cash flow generation and fortress-like balance sheet -- which contained over $169 billion in cash and investments as of Sept. 24 -- allow it not just to survive but thrive during difficult economic environments. Apple also tends to outperform its less financially sound rivals during these times. Many investors have thus come to view Apple's stock as a safe haven during the current market downturn, which is one of the reasons why it has performed better than many other tech stocks this year. The defensive nature of its business should continue to serve Apple well in the coming years.
Apple's shares can currently be had for less than 22 times analysts' earnings estimates for the year ahead. That's slightly less expensive than the forward price-to-earnings (P/E) ratio of the Nasdaq-100 index, which stands at about 22.5. Apple is arguably the best business in that index. But rather than paying a premium for quality, as is typically required, you can buy Apple's stock at a slight discount today.
With its popular products continuing to sell well, and its utility-like cash flows helping to bolster its already awe-inspiring financial strength, Apple could be the bastion you're seeking in the current economic storm. With near-term risks likely already reflected in its discounted share price, Apple's stock is a solid buy today for long-term investors.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
However, after the sell-off, Apple stock looks surprisingly well priced. It currently trades at a price-to-earnings ratio of 21, the cheapest it has been since the pandemic started, only slightly more expensive than that of the S&P 500 at 20.2.
With an earnings valuation on par with the S&P 500, Apple doesn't need to put up high growth numbers in order to justify its valuation. In fact, the company could easily grow earnings per share by double digits with just modest revenue and share buybacks. Apple has been committed to share buybacks, having reduced shares outstanding by more than 20% over the last five years. With the stock price down, it could get more aggressive with repurchases.
I've been skeptical of Apple stock in the past as its valuation has looked stretched over much of the pandemic, but with the valuation even with the S&P 500, the stock looks well positioned to outperform over the next few years.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
Like many tech companies, Apple (AAPL 1.56%) will be happy to see 2022 in its rearview mirror after a challenging year and a particularly ugly December, during which its stock price fell 12.4%. While year-over-year declines were primarily fueled by macroeconomic headwinds that affected the whole market, December saw investors grow uneasy over the company's dependence on China for manufacturing. A spike in COVID-19 cases in that country strained production at the factory that produces about 70% of all iPhones, a device that made up 52% of Apple's revenue in fiscal 2022.
While Apple shares tumbled 24% since January 2022, the figure is significantly lower than Alphabet's stock decline of 35%, Amazon's 43%, and Netflix's 40% in the same period. When looking at the companies' free cash flows as of Sept. 30, Apple won out again with its $111.4 billion against Alphabet's $62.5 billion, Amazon's negative $26.3 billion, and Netflix's $717 million.
Even with companies like Meta Platforms and Sony already participating in the VR market with their respective headsets, Apple's past performance in entering new markets proves purchasing its stock could be an investment in the future leader of the industry.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Intel, Meta Platforms, Microsoft, and Netflix. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long March 2023 $120 calls on Apple, short January 2025 $45 puts on Intel, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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