'Magnificent Seven' investing playbook: Is Apple a growth company anymore?

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Now that summer’s coming to an end, that means it’s time to pull out your scarves, grab a pumpkin spice latte, and reassess your tech stocks. This series helps you decide what to do with your shares of the biggest names in tech — Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia, and Tesla — known as the Magnificent Seven. Next is Apple, the one and only maker of smartphones, computers, and everything else.

Apple stock (AAPL) isn’t having its best moment after reports of an iPhone ban in China sent shares spiraling and the company saw $200 billion slashed from its market cap in 48 hours last week.

But there’s no need to panic, experts say. The big picture for Apple looks pretty darn impressive.

Apple has a “golden installed base of 2 billion consumers,” Wedbush analyst Dan Ives told Yahoo Finance. “That’s the key — Apple is the hearts and lungs of Cupertino, and it’s the best consumer brand in the world.”

“There’s so much to like about it,” Interactive Brokers chief strategist Steve Sosnick added. “It’s not a question of whether Apple is great. It’s whether we’re thinking about it the right way.”

Apple stock: Value or growth?

That said, it’s not clear where Apple finds its next phase of mega-growth.

“Is there another category killer coming down the pike for Apple?” Sosnick said. “I don’t know, but Apple is a mature, dominant player in the smartphone industry, and they have more cash than they know what to do with, which is a tell. A fast-growing company has to use that cash.”

“I’m not saying that they can’t pull a rabbit out of a hat,” he continued. “It’s just not clear what growth rate a company that huge can sustain.”

In short, Apple is in the weird interim space between blue chip and growth stock.

According to Sosnick, the stock has “many of the characteristics of a great value stock,” such as stable earnings, but the market isn’t pricing it “as a true growth or as a true value stock.”

People walk near a display advertising the Apple iPhone 14 outside its store.People walk near a display advertising the Apple iPhone 14 outside its store.

People walk near a display advertising the Apple iPhone 14 outside its store in Shanghai, China, Nov. 7, 2022. (Aly Song/REUTERS)

“Is the market too optimistic about Apple’s growth prospects?” Sosnick said. “If you think of it as a value stock, it’s really appealing, but it’s not priced that way.”

Nevertheless, there’s hope for major growth for Apple, since emerging markets like India represent huge opportunities for Apple moving forward.

But that will take some time, and Ives believes it will be AI that will send Apple barreling forward.

“This is just the middle innings of the next growth cycle with AI as a major tailwind for Apple heading into 2024 and beyond,” Ives said.

What should you do with Apple stock?

If you buy that Apple still has the firepower to become even bigger and grow even more when it’s already one of the biggest companies in history, more power to you. I’m personally more circumspect.

What does Wall Street have to say? Currently, analysts’ recommendations come out to 35 Buys, 14 Holds, and four Sells.

Sosnick has one question Apple investors should perhaps consider asking themselves: “Are you paying for their dominance, are you paying for their staying power, or are you paying for their growth?”

“Those are all different calculations,” he said.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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