Analysts expect Apple to grow earnings at 22.52% yearly for the next five years. This more than doubles the overall market’s expected earnings rate of 10.27%. Since earnings are directly related to a stock’s price over time, Apple’s stock could double the returns of the stock market. For Apple to do this, they’ll need to stay on top of their game. They’ll need to maintain consistent demand by constantly updating existing products and producing unique new products.
They must keep these products a cut above the competition. Innovation and reliability are Apple’s strong points and when maintained, Apple should remain on top of the "stockpile" for many years. I doubt that companies such as Motorola (MMI) (producer of the Droid) or Research in Motion (RIMM) (Blackberry producer) could innovate better than Apple, but that’s not to say that it’s impossible.
The chart above displays a visual of how well Apple outperformed the performance of the S&P 500 index. Apple’s current price of $377 is trading at a 6.7% discount to its high of $404. I think that Apple is ripe for picking by the end of August. The overall stock market may still be volatile for a few weeks, but my feeling is that we’ll get more positive economic news that will put recession fears at rest. I don’t think that the news will be exceptional, but I do think that it will be positive enough to allow the market to at least return to the levels of where it was in January, perhaps better.
Furthermore, the tech sector usually does well between September through December, so I think that biting into some Apple stock in the second half of August would be prudent as a long-term investment. Even if the market continues to fall for a while and Apple stock follows, we can just look at how they bounced back from the lows in early 2009 and yielded a four-bagger (400%) increase in less than three years. So, even if you bought Apple at $200 in 2007 and kept it until now, you would have doubled your money (minus the recent pullback).
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