Editorial

Posted on 27 Jul 2009 at 12:34

 

Gallery

Apple is buoyant but is it really the right time to invest in the company?

Apple's latest published earnings are jaw droppers. That they reveal its highest revenues ever for a non-holiday quarter is merely the butter cream on Victoria's proverbial sponge.

In the quarter to 27 June this year, the company earned $8.34 billion (about £5 billion), which translates to a healthy $1.23 billion (about £748 million) profit. In that time it sold 4% more Macs than it did during the same quarter last year - 2.6 million - and shipped a staggering 5.2 million iPhones. Not bad for such a narrow product line with so many established competitors.

And it doesn't stop there. It's on the cusp of signing a deal to sell the iPhone in China (robbed of its wifi features), and although iPod sales were down it still sold 10.2 million devices. Show me a rival who can match that and I'll delegate someone to eat my shuffle. So, is it finally time for the last few of us who haven't yet jumped on the Apple shares bandwagon to pull out our chequebooks and snap up some stock?

Maybe not. At the time of writing, Apple is trading at $151 (about £91.30) per share. That's down a little under $1.50 (about 91p) since the announcement, but it's still up a lot on the 52-week low of $78.20 (about £47.60). That's when you should have been buying. Its peak in the past 12 months was $180.45 (about £109.80), and if you bought today and it went that far north again you'd turn a tidy profit of 19%. You won't get that much of a return by leaving your cash in the bank.

But buying shares is a risky business. Not as risky as piling your savings on red and waiting for the wheel to stop spinning, but a moderated business gamble nonetheless. Unless, of course, you're an investor.

An investor sits things out, and invests only as much as they can afford to have tied up for the long term. That's the kind of person who can make a moderate profit from what we hope will be sustained growth from the iPod maker. A speculator, on the other hand, snaps up as much stock as they can in the hope of a quick return. But that quick return doesn't always come up.

Since July 2004, Apple's shares have increased in value from around $15 (about £9.12) to over $150 (about £91.30). Repeating that from here on in would be quite a feat. Brett Arends did the maths for The Wall Street Journal, calculating that would make it a $1.25 trillion (about £760 billion) company, the largest in the world. Implausible? Yes. ExxonMobil is the current holder of that record, with a market capitalisation of just $343 billion (about £208 billion).

So where Apple is concerned, now is clearly the time to invest, not speculate or, perhaps, play it safe, sit back and watch what unfolds from the sidelines.

Author: Nik Rawlinson