Apple Stock Jumps Up

The highly anticipated less expensive iPhone is likely to be the beacon of light the tech giant needs for boosting the sales.

For past few months, the most valuable company has been repeatedly finding itself in the vortex of stock shrinking value. The pivotal reason of declining value of the stock was the slowing down of the company’s flagship product –the iPhone. Now, both the investors and the analysts have envisioned that the launch of the highly anticipated new iPhone is likely to be the much needed positive catalyst to boost the sales of the tech giant.

The environment of fear and uncertainty substantially hammered down the Apple’s stock which is now valued closer to IBM –whose declining revenues have been disappointing Wall Street analysts for a long time now –than to technology behemoths Alphabet Inc. and Tesla Motors.  

The Wall Street has expected that the less expensive iPhone which will hit the shelves later in March will be essential in improving sales in developing countries like China. Two weeks since the inception of the bet on the new smartphone, the Apple shares have witnessed a jump of 5%. Moreover, the strategy of bolstering sales in China is commendable as the consumers in U.S. are less likely to upgrade their smartphones more often.

The current stakeholders of the company provided the following rationales for owning the stock which includes, the tech giant’s reliable cash generation, wild card potential for future game-changing products, and beaten down valuation. Moreover, Senior Portfolio Manager at Synovus Trust Company, which tentatively holds more than a million shares of the tech titan, Daniel Morgan expressed the following: "This company has a history of doing better than expectations and surprising people.  Where else can I go and find a company trading at 10 or 11 times earnings that has had such a great history?"

On Wednesday, the Silicon-Valley iPhone maker’s share traded at $100.97. In the lens of finance, the tech giant has been selling the share at 10.7 times its expected earnings per share over the next 12 months. Similarly, over the past two years, Apple’s average forward price-earnings-ratio has been 13. In its comparison, Alphabet Inc. –whose Android competes with Apple’s iOS –trades at 20 times expected earnings and Elon Musk revolutionary Tesla Motors –at the age of only 13 years –trades at humungous 132 times earnings. Moreover the tech company IBM –which is fervently transitioning to cloud computing and like services has a P/E of 10.2, according to the data deduced from Thomson Reuters’.

Motley Fool Funds portfolio manager, David Meier said: "Unless something big happens, (Apple) doesn't deserve to trade at 20 to 25 times earnings anymore. It's just too big. But as a high-quality company, could it trade at 15 times earnings? Certainly."

Simona Jankowski, an analyst at Goldman Sachs reported on Monday that through the new smaller 4-inch screen iPhone, the company is likely to boost the sales volumes by around 5% this year. This increase has not yet been incorporated in the Street expectations.

Analysts have not been much pessimist regarding the stock of Cupertino, Calif. firm. According to Thomson Reuters data, ever since the Apple’s stock encountered a 20% drop one out of 41 analysts recommended selling of the stock while the remaining analysts reiterated “Buy” rating. As of now, 38 analysts recommend “buying the stock” while none has suggested to sell the stock as yet.