When the Apple stock price (Nasdaq: AAPL) slipped below $400 in April and again in June, a lot of Wall Street pundits concluded that the company was a spent force and moved on.
But just when it looked like the Apple bears might be right, the company started to gain back lost ground.
From the year's low of $385.42 on April 19, AAPL has climbed nearly 27% and is again close to $500. The stock closed at $489.10 yesterday (Tuesday).
Much of the recent spurt in the Apple stock price came thanks to much higher than expected sales of the new iPhone 5S and iPhone 5C models in their debut weekend. Analysts had forecast sales of 5 million to 7.75 million units, but Apple announced sales of 9 million.
Apple also raised guidance on both revenue and profit margin for the current quarter to "near the high end" of its previously provided ranges.
That was good enough for a 5% pop in the Apple stock price Monday. But Money Morning Capital Wave Strategist Shah Gilani says the latest surge in the Apple stock price is just the beginning.
"If this stock gets above $515 or maybe $518 - and then consolidates between, say, $500 and $515, you darn well better own this stock - it's going to $585 ... it's going to $600," Gilani said.
Why the Apple Stock Price Will Keep Rising
Gilani made his call on AAPL all the way back on July 10, early enough that the stock has gained 15% since.
He gives six reasons for why he thinks the Apple stock price still has a lot of upside to come:
- The new iPhones are just the beginning of several new products Apple will announce this fall. Plus, it's widely suspected that the company is working on a wearable technology device, such as the iWatch, as well as something related to television.
- With a forward Price/Earnings (P/E) ratio of roughly 11, the stock remains very cheap on a valuation basis.
- Though Apple did not announce a licensing agreement with China Mobile at the iPhone event, most experts believe a deal is imminent.
- Clearly the plan to keep the price on the iPhone 5C was a smart one, as Apple sold the most iPhones ever in a debut weekend. Don't be surprised if Apple lowers the price on the iPhone 5C in January after it has skimmed the maximum profits from the holiday buying season. Then the iPhone 5C can fulfill the role as a mid-range priced option everyone had expected in the first place. A cheaper iPhone will help regain markets share in emerging markets like China and India.
- Several prominent hedge fund managers, including Carl Icahn and George Soros, have moved into the stock in recent months. They didn't build their reputations by buying losers.
- Apple is likely to continue increasing its modest dividend, which pays a yield of 2.6%, and is in the midst of a large stock buyback program (which could get even bigger).
"The bottom line here is that Apple stock has been strong since we recommended it," Gilani said. "And it's going to get stronger."
Note: Shah Gilani is just one of the Money Morning experts that offer top-tier recommendations to Bill Patalon's Private Briefing. In just two years, 12 recommendations have doubled or better. Find out more...
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