I’ve had a bunch of questions from readers this week about the latest ad from David Gardner’s Motley Fool Rule Breakers, so that’s our target today — what are they talking up as the “little known company” that is “allowing Apple to radically reshape the future of the iPhone?”
Here’s the part of the email ad that got my attention:
“… a tiny component is already taking the tech world by storm.
“It’s already powering products made by Google, Samsung, and LG…
“And now, Apple has gone all-in with this tech with their new game-changing iPhone.
“And the smartest minds on Wall Street are already sprinting to take advantage.
“JPMorgan is urging clients to act immediately, ‘before iPhone mania begins in earnest.’
“Because one small American company holds the key patents to this remarkable tech.”
Apple is a stock I’ve owned for a long time, and it has surprised me a bit with its continuing share price strength over the past few months — with shipments of the expensive new iPhone X being watched closely for possible disappointment, I thought we might see more weakness in the shares as folks take some profits ahead if folks begin to worry about the company’s continuing inability to exceed those peak earnings of 2015.
That hasn’t really happened, perhaps partly because of the tax benefits for Apple in the new tax reform bill (both the lower rate and the low-rate “tax holiday for repatriation” will likely provide income boosts for Apple, though they don’t pay anything close to the current corporate tax rate now), and Apple has bought back so many shares over the past few years that they’ve been able to keep some modest earnings per share growth rolling despite the relatively flat top-line numbers, so the shares are holding pretty steady near their all-time highs. And though analysts continue to sift through the tea leaves to and try to insert caution about whether demand is high enough to create another “supercycle” for the iPhone X, others remind us that demand still seems awfully robust (for what it’s worth, I bought an iPhone X and am very pleased with it so far).
So Apple sticks in my portfolio as a reasonably priced dividend-growth company, with a strong brand built on the world’s most successful consumer product, but it’s probably not a stock that’s likely to double in short order or provide dramatic returns from this price simply because of the challenge of discovering new growth avenues (though I wouldn’t have guessed at a 50% surge for AAPL this year, either, so that may be just me being too conservative). All Apple shares have to do now is rise another 12%, and they’ll be a trillion-dollar company, and that makes people worry about how much growth is still possible (though they had the same worries when it was a $300 billion company… people are emotional about such things).
Apple stock is no longer wildly cheaper than the market on a PE ratio basis, as it has b