With its towering market capitalization of $432.44 billion, Apple Inc. (NASDAQ:AAPL) remains one of the most widely-held investments in the market today. Regardless of whether you’re a populist investor of the savvy tech giant or not, the headlines that the company has been making over the past few months have been hard to miss. Yet for the moment, Apple Inc. (NASDAQ:AAPL) also carries a conflicting sentiment for most investors who are now forced to view the company through two distinct lenses.
A declining company that has lost its way
As a leader in technological innovation, Apple Inc. (NASDAQ:AAPL) has done little to impress the markets when it comes to the latest versions of its most popular products. The iPhone 5 and the iPad Mini were far from the raving successes that once set the bar high for the company. The loss of Steve Jobs also appeared to have made a strong statement in regards to the lack of innovation to follow. It was as if the captain of the ship himself had been flung overboard.
The introduction of changed policies appeared to confirm this concept. When Apple Inc. (NASDAQ:AAPL) reversed a 17-year hiatus from issuing dividends, it appeared as if the order itself defied how the company carried itself. After all, it was Steve Jobs who always believed that the company could make much better use of its cash than merely handing it back to investors. Had the company run dry on innovation?
Since marking an all-time high around $700 per share in September 2012, Apple Inc. (NASDAQ:AAPL) fell nearly 45% in a steady decline. While coming off of a historic run leading higher, the fact remained that Apple’s growth appeared to be waning in the background. The company ultimately missed analyst expectations two quarters in a row thereby highlighting a trend that was already beginning to take shape. Seen in the graphic below, Apple’s growth appeared to be failing.
AAPLRevenue Quarterly YoY Growth data by YCharts
A growing company in transition
But for all the clamor of a company in decline, an opposing view also suggests that Apple Inc. (NASDAQ:AAPL) has merely shifted gears into another phase of corporate development. After all, it was always unrealistic to believe that a company could keep the pedal to the metal when it’s grown to be the size that Apple is now. Likewise, the general trend of the company’s revenue and earnings have continued in the right direction as seen in the graphic below. One could argue that the latest dips were mere realignments back towards the area of support Apple has traditionally seen. With Tim Cook promising more “surprises” and “product categories” to come in the near future, it might very well be that Apple’s trend of rising revenue and earnings will continue to hold.
AAPLRevenue Quarterly data by YCharts
The parallel rise in cash could also be attributed to this trend and was quickly outpacing its usefulness as a reserve. By increasing its buyback up to $60 billion, Apple can theoretically reduce anywhere between 10% to 15% of the company’s outstanding shares. But Apple’s historic buyback will ultimately do much more than merely reduce the amount of shares on the market. The consequential effect is that it will also increase the earnings-per-share and reduce cash outflow from dividends by a similar percentage as well.
With the current yield of 2.65% as of May 6, Apple continues to pay one of the highest yields for a tech company. Establishing a trend of dividend growth, this gives additional reason for investor support for those looking to diversify within dividend growth companies. The latest bond offer by Apple also remains indicative of the company’s ability to leverage its cash in order to attract favorable financing. With such an advantage in regards to efficient cash use, Apple may be settling into its new role as a growing income investment.
Conclusion
It largely seems that no matter how one looks at it, Apple appears to be settling in with a change of appearance. The company’s stellar rise may have subsided, but so has the strategy in returning value to shareholders. Barring the introduction of an unknown factor, the best thing investors should consider is whether the company still fits the criteria he or she is looking for in the company as an investment.
While it remains more than possible for Apple to shock the world again with ongoing innovation, one has to wager whether such unanticipated growth can justify the valuation already baked into the existing share price. Now trading at roughly 10 times some of the company’s highest earnings, Apple appears fairly valued in light of a weakening display of product releases. On the other hand, the company’s efficient raise of cash and its willingness to distribute it back to investors also appears to be signaling that its focus is to become more shareholder friendly.
Therefore, whether you find yourself more bearish or bullish on Apple may simply come down to your strategy of how you’re incorporating it into your portfolio. Those seeking value and income may find Apple attractive in regards to the ongoing buyback and rising yield. Yet those seeking growth may not necessarily find it here in Apple unless it comes about and proves itself once again.
The article The Two Ways To Now View Apple originally appeared on Fool.com is written by Prov2120.
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