Apple Stock: Is It a Good Buy Right Now?
Stock market lore is replete with stories of how rich you could be if you had bought Apple stock (Nasdaq: AAPL) early on. This would be helpful information if investors were time travelers, but they’re not. So the only question that matters is this: Is Apple stock a good buy right now?
To find the answer to that question, consider the company’s present situation and where it’s likely to go, not where it’s been.
Apple’s Recent Performance
On Jan. 27, Apple released its quarterly earnings for the first quarter of 2022. To say that earnings were good would be an understatement. They beat analysts’ expectations in every category except for iPad sales.
Here are some key takeaways, as reported by CNBC:
- Earnings per share (the amount the company earned in the quarter divided by the number of shares outstanding) were $2.10, compared to the expectation of $1.89.
- Revenue was expected to be $118.66 billion, but it was actually $123.9 billion, an increase of 11% over the same quarter last year.
- Revenue for the iPhone product line grew 9% over the same period last year, to $71.63 billion. It was expected to be $68.34 billion.
Overall, Apple performed quite well.
Apple stock pays dividends — most recently, $0.22 per share, paid on Nov. 5, 2021 — to shareholders of record. Before you rush out to buy Apple stock in anticipation of the Feb. 10 dividend payment, understand that this dividend has already been priced into the stock’s price. But declaring a dividend is a sign of strength.
Where It Might Be Going
While it’s difficult to determine the future of Apple, some things are known.
As of Jan. 27, Apple had over $195 billion in cash. When a company has a lot of cash, it usually does one of three things with it. It may pay a dividend, which Apple is already doing. But it will still have quite a cash stockpile, so it may buy other companies, or it could buy back shares of its own stock. BBC News reported in February 2021 that Apple had bought about 100 companies over the previous six years — about one every three to four weeks, recently focusing on the augmented and virtual reality, artificial intelligence, maps, health and semiconductor industries, according to CNBC. Apple also likes to buy back stock — to the tune of almost $450 billion in recent years, CNBC reported.
Good To Know
Stock buybacks are beneficial to existing stockholders since they reduce the number of shares outstanding. When you divide the company’s value by a smaller number of shares outstanding, the value of each share rises.
Apple products are very popular, and its customers are very loyal, so the company’s outlook is pretty rosy. But there are always risks, and the current shortage of chips used in iPhones and iPads could be cause for concern. Apple CEO Tim Cook told CNBC that the company’s performance had been affected by supply constraints due to chip shortages and pandemic-related manufacturing disruptions, which led to the company’s inability to meet the demand for iPads — the reason sales of that product fell short of expectations.
Many companies will state their expectation for their performance for the upcoming quarter when they announce their results for the previous quarter. Apple has not done this recently, due to the uncertainty around the pandemic, but it did say in its Oct. 28, 2021 earnings release that it expected to reach its highest revenue ever in the December quarter, despite ongoing chip and manufacturing challenges — and it did.
What the Analysts Say
You can also get an idea of a stock’s likely performance by looking at what the analysts have to say. These professionals make their living by following the performance of several companies in an industry and making recommendations as to whether investors should buy, hold or sell the stock.
According to Yahoo Finance, of 38 analysts who follow Apple stock, 11 rated the stock a “strong buy,” 21 rated it a “buy” and six rated it a “hold.” None of the analysts considered Apple to be an underperformer or recommended that investors sell it.
At the market close on Jan. 28, Apple stock was trading at $170.33. The analysts who follow the stock provide a target price, which they think the stock will reach in the short term. For Apple, those estimates range from $128.012 to $210 and average $180.94, all of which are slightly higher than the estimates for last quarter.
Is Apple Stock a Good Buy Now?
Apple has historically been a good performer, and the analysts seem to agree that the stock is worth buying. But any single stock can be volatile, and you should look at each purchase in the context of your entire portfolio.
Apple is a large-cap stock in the technology sector. If your other investments already include “FAANG” stocks like Facebook, Amazon and Google, you may want to think twice about adding Apple to the mix. On the other hand, if you have a good mix of stocks in diverse industries, Apple may be a good pick for you.
In the event you like Apple stock but feel that investing in individual stocks is riskier than you’re comfortable with, consider purchasing a mutual fund or exchange-traded fund that has Apple in its portfolio. Funds contain bundles of securities from different companies and/or industries. The diverse holdings can make them a safer investment than individual stocks.
Keep In Mind
Apple is a historically solid investment and has made many early investors very wealthy. Those who are considering buying the stock at this point, however, need to understand that it cannot replicate the gains it made in the early years. By the same token, buying Apple now is far less risky than it was in the early 1980s.
How To Buy Apple Stock
Here’s a look at the steps to take to buy Apple stock.
1. Select a Broker and Open an Account
To buy Apple stock, you need to go through a broker. You can open an account through an online broker like E-Trade, Charles Schwab or TD Ameritrade if you want to execute your own trades. Online brokers have low or no fees, but you won’t get much advice about which stocks to choose.
You could also go to a full-service broker, like Edward Jones or Morgan Stanley. These firms offer advice and financial planning services, but they also have higher fees. And they may require a minimum balance to open an account, depending on the option you choose.
Once you’ve decided what type of broker you want to use, you’ll need to open an account and put some money in it. Then it’s time to start buying.
2. Consider Commissions and Ticket Charges and Make Your Purchase
To purchase shares of stock, you’ll need to know the ticker symbol. For Apple, this is AAPL. You’ll also need to know which exchange the stock is traded on. Apple, like many tech stocks, is traded on the Nasdaq exchange.
Decide how many shares you want to buy and make your purchase. You may be charged fees, such as a commission and/or ticket fee, for each trade. Be sure you know what fees you’re being charged and how much they cost and figure that amount into the price you’re paying for the shares. Fees should inform your choice of broker, especially if you’re planning to buy and sell regularly rather than hold your investments for a long time.
3. Maintain a Balanced Portfolio
Now comes the hard part — waiting. Most stocks, Apple included, will fluctuate in value over time. That’s the nature of investing. Although there’s no guarantee on what a particular stock or the overall market will do over time, historically, the market has always gone up over the long run. So lest you be tempted to sell at the first sign of a decline, that’s rarely the best move, especially for a blue-chip stock like Apple. Holding stocks for the long term and maintaining a balanced portfolio have always been winning strategies.
Daria Uhlig contributed to the reporting for this article.
Data is accurate as of Jan. 28, 2022, and subject to change.
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- Investing.com. "Apple Stock Price Today | AAPL Live Ticker."
- Apple. 2022. "Apple Reports First Quarter Results."
- CNBC. 2022. "Apple Revenue Pops 11% To $123.9 Billion, Cook Says Supply Chain Improving."
- Yahoo Finance. "Apple Inc. (AAPL) Stock Price, News, Quote and History."
- Apple. 2022. "01-27-22 Apple Reports First Quarter Results."
- CNBC. 2021. "Apple Now Has $195.57 Billion in Cash on Hand, up $3.7 Billion."