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And this year’s event – taglined “Wonderlust” and held last week – was as glitzy as ever. Apple unveiled the latest version of its ubiquitous iPhone and the next generation of the Apple Watch.
As a career software developer and entrepreneur, I was taken with the many new tech features that were part of the product debut. As an investor and trader, I watched to see how “Wonderlust” affected Apple’s stock price.
And then I asked myself this question:
Would someone be better off buying an iPhone 15 Pro for $999 – or using that same amount to pick up roughly six shares of Apple stock?
For the answer, I turned to Quantum Edge Pro analyst Jason Bodner.
“You know, Keith, it’s tough to think of any product in history whose year-after-year releases stoke such euphoric anticipation – creating a kind of ‘must-see TV’ in the gizmo realm,” Jason shared with me.
“This marketing and brand brilliance are one reason iPhones are Apple’s biggest revenue producer – by far. The genre-defining device brought in $205.5 billion in sales last year, more than half of the company’s $394.3 billion in total revenue.”
As we usually find when analyzing any stock, there’s a “wild card” to consider.
Apple recently bled out $200 billion in market value in just two days after reports surfaced that Chinese government workers were banned from bringing iPhones into the office or using them for work. According to BBC News, some people working for state-owned companies said they were ordered to cease using Apple devices by the end of the month.
With China accounting for 18% of Apple’s total revenue last year, that’s a sour development that could gouge the company’s top line.
Jason’s proprietary analysis factors in everything – the good and the bad – and gets us to the “bottom line” for an answer to my question.
Apple Under the Quantum Edge MicroscopeJason’s system gives every stock a Quantum Score ranking – kind of like a report-card grade, but one that tells you whether it’s a buy, sell, or hold. For Apple, that Quantum Score is 65.5, which is good.
It’s not in his optimum zone between 70 and 90, but it’s very close – and that’s a positive.
The technicals rate 67.6, which is good… but not great.
Shares are up nearly 15% over the last 12 months. But the shares took a hit over that heavy-handed Beijing edict. The stock is down roughly 1.4% over the last month.
The fundamentals – the company’s underlying financial strength – are a slightly weaker 62.5, Jason told me.
He says that sales and earnings growth are middle of the road – not surprising for a behemoth like Apple. Debt is higher than he likes to see. And with the shares trading at nearly 30 times expected earnings, the stock itself is a bit pricey, Jason feels.
That “richness” is confirmed by Apple’s price/book ratio of 47.3.
Finally, Jason is able to “spy” on what the Big Money investors are doing on a real-time basis. We’re talking here about the true “smart money” on Wall Street – the hedge funds and other institutional players who work to disguise their stock-price-impacting money moves.
If you’re able to piggyback off their moves, you can get ahead of most other investors.
According to Jason, Apple is owned almost everywhere – which helps explain why the last three years have been more of an up-and-down pattern of buys (green bars) and sells (red bars).
Putting it all together: Jason says he wouldn’t sell Apple shares if you own them… but he also wouldn’t rush out to buy the stock right now.
So… if you have that extra cash… you may get more joy out of a new iPhone than the return you’d get from Apple’s stock.
But there’s another option…
You can pick “Door No. 2” – and take a more innovative (and potentially more rewarding) path.
Jason says he has a better way to “cash in” on Apple.
He calls it: “Riding the iWave.”
The Pick-and-Shovel PlayWe all know the strategy – the so-called “pick-and-shovel” approach to investing. Levi Strauss famously pulled this off back during the “gold rush wave.” Instead of prospecting for himself, he sold durable pants to miners. By the time of his death in 1902, his estate was worth $30 million.
You can play the same strategy with Apple, Jason says, by panning for gold among its suppliers.
Jason said for Apple, one of those suppliers is Qualcomm Inc. (QCOM).
The San Diego-based company makes chips that connect devices like the iPhone to mobile networks, and it is an impressive “hoarder” of patents.
With over 140,000 granted and pending patents across 100 countries and jurisdictions, Qualcomm uses the friendly phrasing that its global licensing program “enables us to share our world-leading inventions and licensees.”
But, more shrewdly, if you want to play ball in the phone space, you almost have to turn to Qualcomm.
And we saw that recently play out.
Apple and Qualcomm had a deal in place that was supposed to end this year, but just recently, Qualcomm announced it signed a new supply agreement with Apple for its 5G chips that will last until 2026.
This year, the Qualcomm stock price is mostly flat and has underperformed many of its peers and the overall stock market.
As a result, its Technical Score in Jason’s system is low at 35.3, which drags down the overall Quantum Score to 55.2. But it gets much more interesting when Jason looks at the surprisingly strong Fundamental Score of 83.3.
Sales and earnings growth are decent. The company’s 23.2% profit margin is quite good, and it carries lower levels of debt than Apple at an acceptable 44.1% of equity.
Jason says the valuation is an alluring 11.8 times projected earnings. And the $15.8 billion market cap seems a lot easier to grow than the Mount Everest-like $2.7 trillion for Apple.
The weak technicals may be reason to not move quite yet, but recent news and those strong fundamentals increase the odds that this stock will be higher 12 months from now.
Bottom line: The best stocks to find are ones with strong fundamentals and technicals and Big Money flowing in. And if you can get them at a small to midsized market capitalization, that’s when you find your biggest moneymaking potential. Jason just recommended that same kind of stock as his favorite artificial intelligence play in his Quantum Edge Pro service (friendly reminder that subscribers must be logged in to access).