4 Signs that It's Time to Sell Apple Stock
Both the company and the shares have continued their amazing run since the death of Steve Jobs. Watch for these factors that could take the shine off Apple in the future.
Shares of Apple (symbol AAPL) skyrocketed after the company’s Christmas-quarter results made it clear that demand for Apple’s products didn’t diminish following the death last October of founder Steve Jobs. But with the stock jumping 36% so far this year, and with Apple’s market value surpassing $500 billion, you might be wondering whether this run can last.
Analysts contend that it can. In fact, the stock, which closed at $552.00 on March 12 and still sells at a reasonable 13 times estimated year-ahead earnings, could keep climbing unless one or more of four warning signs emerge. Although none of them is in evidence today, here are some things to watch for.
Empty pipeline: Apple’s stock is fueled by the release of new and refreshed products that fly off the shelves, says Shaw Wu, an analyst with Sterne, Agee & Leach, an Alabama-based investment firm. Apple launched the third iteration of its iPad on March 7 and is expected to unveil the next-generation iPhone in the fall. Expect a stronger push into television, too. In other words, the Cupertino, Cal., company has plenty to keep registers ringing for the foreseeable future. Don’t worry until the product pipeline is empty.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Quality crash: Consumers are willing to pay extra to buy Apple gizmos because they are well-made and easy to use. But if the products were to start disappointing consumers, sales growth would decelerate; sales might even fall. That would give Apple’s rivals a chance to nab market share, says James Ragan, an analyst with Crowell, Weedon in Los Angeles. Though critics panned the antennas of an earlier iPhone model and labeled the 4s version “disappointing,” consumers have considered each product better than the last and have shown their approval by upgrading. If sales slip in the wake of quality complaints, reevaluate.
Price exceeds growth: Apple stock is selling for six times more today than it was at this time in 2007. But the company’s profits are six and a half times higher, says Wu. A company that generates $100 billion of revenues annually can’t double every year, obviously, but analysts expect Apple’s earnings to grow at a nearly 20% clip over the next several years. With its price-earnings ratio well below that number, the stock is still cheap. Take a second look when the P/E exceeds earnings growth.
Sales in China fall: China is Apple’s next big frontier. The company already sells iPhones there -- in fact, its products are so popular that prospective buyers get in fistfights just to keep their place in line. Apple is now in talks to sell the iPhone through China’s biggest wireless firm. If Apple strikes a deal, says Wu, expect another burst of revenue growth. If the deal falls through or something happens to quell consumer demand in China, Apple’s growth might slow, and that might be a signal to sell.
ORDER NOW: Buy Kiplinger’s Mutual Funds 2012 special issue for in-depth guidance on the only investments you need.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Stock Market Today: Stocks Tumble on Disappointing Big Tech Earnings
Poorly received quarterly results from Alphabet and Tesla sparked a steep selloff in equities.
By Dan Burrows Last updated
-
Stock Market Today: Mega-Cap Tech Rallies to Drag Markets Higher
Markets focused on upcoming earnings from Magnificent 7 stocks rather than chaos in D.C.
By Dan Burrows Published
-
Stock Market Today: Stocks Tumble After Spectacular Global Internet Crash
Market participants rushed out of risk assets to end a wild week of trading.
By Dan Burrows Published
-
Stock Market Today: Dow Sinks 533 Points as Big Banks, Mega Caps Slump
Goldman Sachs and Apple were two of the worst-performing blue chip stocks on Thursday.
By Karee Venema Published
-
Stock Market Today: Semis Get Slammed and Blue Chips Bounce
The potential for more curbs on tech sales to China set off a rotation into blue chips.
By Dan Burrows Published
-
Stock Market Today: Dow Spikes 742 Points After UnitedHealth Earnings
The S&P 500 and Nasdaq also scored wins Tuesday albeit with much smaller gains than the blue chip Dow.
By Karee Venema Published
-
Stock Market Today: Dow Adds 210 Points as Apple, Goldman Hit New Highs
A big rally in blue chips and some dovish Fed speak boosted the equities market Monday.
By Karee Venema Published
-
Stock Market Today: Markets Bounce Back on Rate-Cut Optimism
The latest readings on consumer sentiment and inflation helped lift the odds of the Fed easing in September.
By Dan Burrows Published