Cash, valuation, and innovation position Apple Inc. (NASDAQ:AAPL) stock to resume its climb

Cash, valuation, and innovation position Apple Inc. (NASDAQ:AAPL) stock to resume its climb

Cash, valuation, and innovation position Apple Inc. (NASDAQ:AAPL) stock to resume its climb

After last year’s slump, Apple (NASDAQ:AAPL) appears ready to move on from the iPhone. The product launched the lucrative smartphone market and took the market cap of AAPL stock briefly above $1 trillion. Now, falling prices have forced the company to grow without the help of its long-time core iPhone product.

Fortunately, the company’s massive cash assets and reasonable valuation leave it well-positioned for such a comeback. Given the prospect of returning growth in the coming years, it’s likely the time is now to begin building long-term positions in Apple stock.

Apple’s Compelling Long-term Outlook

This month, AAPL stock has plateaued in the neighborhood of $170 a share. In the short term, I have low my expectations for Apple stock. I noted in mid January that the iPhone maker needed to “declare independence from iPhone dependence.” The company is doing just that, but it will take time.

However, despite miscues, I see too many reasons not to count Apple stock out longer term. Chief among them is its stash of cash. As of the recent quarterly report, Apple now holds $245 billion in cash, more that some of the world’s biggest central banks. Although most of the horde is kept overseas, Apple will reportedly bring much of that cash back home over the next few years. Either way, as we learned from Microsoft‘s(NASDAQ:MSFT) experience a few years ago, Apple holds enough cash to buy the innovation they cannot invent themselves.

This money gives AAPL a multitude of options. They could become a more dividend-oriented company and hike the payout. I see that as the quickest path to boosting the Apple stock price. The company could go into entertainment, perhaps buying Disney (NYSE:DIS) as my InvestorPlace colleague James Brumley suggests. Also, it appears they have invested some cash in achieving leadership in healthcare. As I mentioned in a recent article, last month former Apple CEO John Sculley predicted that the healthcare-related features on the Apple Watch will become the company’s biggest game changer since it introduced the iPhone in 2007.

Whatever new products emerge, investors can buy that innovation at a low price. The price-to-earnings (PE) ratio stands at 14.1. Historically, Apple stock has not commanded high multiples, and declining profits will hurt them in 2019. However, analysts predict 11.8% earnings growth for 2020. They also project average profit increases of 13% per year over the next five years. Despite lingering uncertainty, this growth should drive Apple stock higher in the coming years.

Overall, the bias in prices is: Sideways.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 184.88.

The projected lower bound is: 161.20.

The projected closing price is: 173.04.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 66.6949. This is not an overbought or oversold reading. The last signal was a sell 9 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 62.29. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 33 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 68. This is not a topping or bottoming area. The last signal was a sell 10 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.

Rex Takasugi – TD Profile

APPLE INC closed up 1.910 at 172.970. Volume was 52% below average (consolidating) and Bollinger Bands were 26% narrower than normal.

Open High Low Close Volume___
171.580 173.000 171.380 172.970 18,913,154

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 170.91 161.01 191.47
Volatility: 11 49 38
Volume: 21,729,970 37,500,284 32,622,690

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

APPLE INC is currently 9.7% below its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into AAPL.O (mildly bullish). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 19 periods.

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