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Apple Stock May Not Climb, But Will Still Reward Investors

Company Apple logo

There was really only one good thing for Apple stock investors in yesterday's (Tuesday's) earnings report.

Apple Inc. (Nasdaq: AAPL) announced an unprecedented share buyback program and boosted its dividend in attempts to pacify edgy investors who have watched the company's stock tumble about 34% over the past six months.

The iPhone maker will return $100 billion of cash to shareholders by 2015, through an increased dividend and $60 billion share buyback program. Apple's quarterly dividend was sweetened 15% to $3.05 a share. The stock now carries a juicy 3% yield. The new dividend is payable on May 16 to shareholders of record May 13.

With an annual payment of some $11 billion, Apple becomes the biggest dividend payer in corporate America, taking the crown from Exxon Mobil Corp (NYSE: XOM).

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Apple Stock Rises Before Earnings, but No One's Expecting Good Numbers

Apple stock was up nearly 2% by noon today (Tuesday) - but this could be the end of gains for a while depending on what happens this afternoon.

Undeniably the most anticipated earnings report of the season is the Apple earnings report, due out after the close Tuesday. Expectations are for a downright dismal quarter.

Among the issues Apple Inc. (Nasdaq: AAPL) is expected to address include:

  • iPhones: Apple generated some $22.7 billion from the sale of 35 million iPhones in the same quarter a year ago. Investors will want to hear how much competition from other smartphone markers, like Samsung, has chipped away at those numbers.
  • iPads: Apple sold 11.8 million iPads that generated $6.6 billion in sales over the same period a year earlier. With the bevy of new and cheaper tablets now on the market, it is unlikely Apple has been able to maintain those robust sales.
  • Gross Margins: Gross margins peaked at an astounding 47.4% during this quarter last year. Apple's warning last October that margins could drop as low as 38% was the catalyst behind the stock's steep plunge. In January, Apple said profits should come in around 37.5% to 38.5%. These numbers are crucial.
  • Revenue and Profit: Last year, Apple earned $12.30 a share on revenue of $39.2 billion. Estimates are for $10.12 a share on revenue of $42.6 billion. Even the slightest miss could wallop shares.
  • Guidance: Most importantly will be what the company says about future quarters. Analysts expect Apple to guide lower, at least for the next couple of quarters.

Of particular interest will be what Apple plans to do with its hefty $157 billion cash stash. A special or increased dividend and a bigger share buyback could provide a temporary boost to the stock. But any gains are likely to be short lived.

"People have to be patient. The next quarter will be disastrous and the quarter after that stock will only go in one direction and that is down," Trip Chowdhry, co-founder of Global Equities Research told CNBC.

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Is Apple Stock a "Buy"?

Frank apple

Shares of Apple Inc. (Nasdaq: AAPL) are down 25% this year, which means hungry investors want to know - is Apple stock a "Buy," or is it a "falling knife" to avoid?

While some analysts are screaming "Buy," there's some discouraging news to consider. For example, Apple supplier Cirrus Logic Inc. (Nasdaq: CRUS) reported an inventory glut of audio chips that signals Apple iPhone sales could fall drastically short of expectations.

Money Morning Chief Investment Strategist Keith Fitz-Gerald explains what's going on with Apple stock, whether or not investors should scoop up shares, and what to expect next from this iconic company.

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An Apple Stock Dividend Hike Could Help Set Cash Hoards Free

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If Apple Inc. (Nasdaq: AAPL) actually does what many now expect - raise the Apple stock dividend as much as 56% - it could help inspire a trend of givebacks by other cash-rich companies.

Looking at the company's cash hoard of $137 billion - which could reach $170 billion by year's end - a survey of analysts conducted by Bloomberg News this week concluded that an Apple stock dividend hike of $4.14 a share is a likely possibility.

That would raise the stock's yield from about 2.40% now to a much more attractive 3.6% -
higher than 84% of the other dividend-paying companies in the Standard & Poor's 500 Index.

An increase in the Apple stock dividend would almost certainly boost the stock price, which is down about 35% from its Sept. 19 high of $702.10.

"The accumulation of cash has become excessive," Brian White, an analyst at New York-based Topeka Capital Markets Inc., told Bloomberg. "It doesn't matter which bearish scenario you forecast, they're never going to need this much cash."

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What Should Apple Do with its $137 Billion Stockpile of Cash?

safe

Apple Inc.'s (Nasdaq: AAPL) been in the news a lot of late as its stock plunged. Meanwhile, the company sits on a cash pile of $137 billion.

When Apple stock was soaring, investors were happy. But since its stock value plunged some 35% since September, many investors have suggested Apple should share some of itsaccumulated wealth. Fund manager and investor David Einhorn went so far as to sue the company to try to force it to share more of its cash with shareholders.

Money Morning Chief Investment Strategist Keith Fitz-Gerald was asked on FOX Business what Apple (Nasdaq: AAPL) should do with its stockpile of money: Should the company pay dividends to shareholders, pursue major acquisitions or just keep its large cash position for future investments or other costs?

Check out what Fitz-Gerald and other panelists said on the FOX Business report in this accompanying video.

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The Apple Stock Drop: What You Need to Know (Nasdaq: AAPL)

As Apple Inc. (Nasdaq: AAPL) stock continues its seven-week tumble, investors want to know what is likely to happen next.

Since hitting an all-time high of $702.10 on Sept. 19, Apple stock plunged $155.04 --more than 22% to close at $547.06 on Friday.

Investors have gotten little help from Wall Street analysts, who have offered diametrically opposed opinions on where AAPL is headed.

Among the prominent bears is Doubleline Capital CEO Jeff Gundlach, who predicted on Thursday that Apple stock would continue all the way down to $425. He said that's about where AAPL was when it started its dramatic climb in January, and he expects it to return to those levels.

Gundlach is down on Apple because he thinks the Cupertino, CA-based company's new products are no longer cutting edge.

"I'm really struck by this mini iPad thing as if that's any kind of a product innovation," Gundlach told CNBC."Once you just start changing the size of your products, I really think you're not exactly innovating."

Meanwhile, some Apple bulls insisted the stock will not only bounce back, but eventually will reach beyond $1,000 a share.

Brian White, an analyst with Topeka Capital Markets, said in a note to clients on Thursday that he's keeping his $1,111 price target on AAPL.

"We believe that those investors that have missed the Apple rally over the past year are presented with a very attractive entry point heading into the strong holiday news season," White wrote.

So which story are Apple investors to believe?

To figure that out, let's take a closer look at what's been going on.

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Is Apple Stock (Nasdaq: AAPL) the Short of a Lifetime or the New Widow Maker?

I have a confession to make.

I believe Apple stock (Nasdaq: AAPL) is going to be world's first trillion-dollar company yet I want to short the snot out of it.

Am I being compulsive?...impulsive?....or foolish?

Perhaps it is all three considering that Apple has risen more than 3,000% in the last ten years, turning almost any attempt to go against the grain into a "widow maker" trade.

I say almost because I am one of the lucky ones.

A few weeks ago I recommended my Strike Force subscribers purchase put options on Apple, effectively shorting the stock. That resulted in a 47% profit in less than 24 hours for anyone who followed along, excluding fees and commissions.

I'm not alone in my thinking.

Uber investor Doug Kass, general partner of Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP, tweeted recently that he had covered "half his short" on Apple following the announcement of their dividend and buyback plan.

Given that the stock had run up to nearly $608 a share before the announcement, presumably Kass had banked some gains, too.

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How to Earn a 9.25% Gain in 30 days While Waiting for Apple's
(Nasdaq: AAPL) Dividend

Although it's been one of the market's darlings for a decade now, dividend-oriented investors have long shunned computer giant Apple Inc. (Nasdaq: AAPL) because, well ... it didn't pay one.

That, coupled with AAPL's historically high share price, has always kept me from buying Apple stock - but, as a trader, it hasn't kept me from generating income with Apple options.

Last week, the cash-rich company finally took a step toward rewarding loyal shareholders by declaring a dividend - a quarterly payout of $2.65 a share, beginning with the fiscal fourth quarter, which runs from July 1 to Sept. 30, 2012.

Assuming the payouts continue, which they almost certainly will, that means Apple's annual dividend in fiscal 2013 will be $10.60 a share, which sounds fairly rich - except for one thing...

At its closing price of $599.34 last Thursday, Apple remains one of the market's highest-priced stocks, meaning the new annual dividend of $10.60 will equate to a yield of only 1.76%.

That's decent, but it's hardly near the top of the income-stock ranks. Plus, it'll be well over a year before you can collect the full dividend.

Fortunately, by using options, you can easily generate some significant income while waiting for Apple's new dividend to kick in - and multiply your yield at the same time.

Let me explain...

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Apple Inc. (Nasdaq:AAPL): When to Buy the World's Hottest Stock

Shares of Apple Inc. (Nasdaq: AAPL) are taking a breather, leaving many investors wondering if they've made an iBoo-Boo.

The hottest stock on the Nasdaq has fallen more than 4.6% as I write this since hitting a new intraday high of $526.29 on February 15, 2012.

Does that mean it's time to sell?

Perhaps, but first you should ask yourself why.

If you're a long-term investor, there's a lot to look forward to. Apple is much more than a brand; it's a lifestyle. People tattoo the company's iconic brand on their rear ends for crying out loud.

Always the innovator, Apple has barely scratched the surface with regard to new devices and has hardly tapped into ways to use them.

People line up thousands-deep to buy newer versions of the company's most basic products every year -whether they need them or not.

That is something no other tech company has figured out how to do.

Plus Apple's market share is growing overseas, with a particular emphasis on the Asian Rim.

In China alone, for instance, there's the potential for another 30-50 million iPhone sales in the next 12 months that could add another $4-6 in EPS to Apple's bottom line.

I remain convinced that Apple could be the world's first trillion-dollar company and I'm not alone in my thinking. Since I first voiced that highly controversial opinion a few years ago, many other firms and analysts have joined me.

How to Play the Short-Term Apple Top

But in the short term, Apple's chart now looks like a classic blow-off top- and technically speaking it is.

Last Wednesday, we saw the stock close near the lows of the day after making a quick run up and a high volume, hi-speed failure midday.

The chart tells the story.

Take a look

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Why Apple Stock Is Headed for $500 – And Beyond

Even with the product lineup it has now, Apple Inc. (Nasdaq: AAPL) stock has enough fuel in the tank to propel it to at least $500 a share.

But it's about to add a booster rocket.

According to several analysts, Apple is working on a TV-set device that could disrupt the TV set industry much as its other devices have done in their industries.

This new device - to simplify, let's call it the "iTV" - is not to be confused with the existing Apple TV, a set-top box that allows users to access digital content from the Internet on their televisions.

We're talking about a full-fledged television, albeit one with Apple's special touch. And that is what will push Apple stock even further skyward.

In a note to clients last week, Piper Jaffray analyst Gene Munster made a case that Apple is already building the iTV, which he expects could add billions of dollars to the Cupertino, CA company's top line.

"We believe that of the estimated 220 million flat panel TVs sold in 2012, 48% or 106 million units will be internet-connected, of which Apple could sell 1.4 million units," Munster wrote. "We believe an Apple Television could add $2.5 billion or 2% to revenue in 2012, $4.0 billion or 3% in 2013 and $6.0 billion in 2014."

Munster said he had met with Asian component suppliers that said they knew of prototypes of the new Apple device, and that the company had filed several patents for television interfaces.

But the definitive piece of evidence is a quote from Steve Jobs biographer Walter Isaacson's just-released book in which Jobs makes it clear that an iTV was the company's next major project.

"I'd like to create an integrated television set that is completely easy to use," Jobs said. "It would be seamlessly synced with all of your devices and with iCloud. It will have the simplest user interface you could imagine. I finally cracked it."

That "simplest user interface" is the key to why an iTV would be such a game-changer.

Tomorrow's TV

The iTV will not use a remote of any kind. It will be voice-controlled, using the same Siri technology Apple introduced earlier this month with the iPhone 4S.

"It's the stuff of science fiction," writes Nick Bilton in The New York Times. "You sit on your couch and rather than fumble with several remotes or use hand gestures, you simply talk: "Put on the last episode of Gossip Girl.' "Play the local news headlines.' "Play some Coldplay musicvideos.' Siri does the rest."

The iTV was waiting for Siri - technology that allows people to simply tell their television what they want to watch, whether it comes from the Internet or from a programming provider like Comcast Corp. (Nasdaq: CMCSA) or DIRECTV (Nasdaq: DTV).



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Don't Worry: Apple Stock Will Bounce Back

Suddenly, Apple Inc. (Nasdaq: AAPL) appears mortal.

With Apple stock falling 5.59% yesterday (Wednesday) to close at $398.62 following an uncharacteristic earnings miss Tuesday, the company has lost its aura of invincibility.

Apple delivered $7.03 a share on $28.27 billion in revenue but analysts had expected earnings of $7.28 a share on revenue of $29.45 billion.

"The implications of an Apple miss means more than is typical, given the importance of its auraof brilliance in sustaining premium price points and product loyalty," Alex Gauna of JMP Securities wrote in a research note. "This will likely also add to well-placed investor anxiety around how the company sustains its momentum under new leadership."

The earnings disappointment - Apple's first since the second quarter of 2002 - was just one of several recent bruises suffered by the Cupertino, CA-based tech giant.

Concern started brewing in August when Steve Jobs resigned as CEO, but Jobs' death from pancreatic cancer earlier this month seemed to rob Apple of some of its magic.

Then the Oct. 4 introduction of the iPhone 4S was met with disappointment because it wasn't the much-rumored iPhone 5.

The series of stumbles has Apple investors wondering whether their days of huge gains are over. But the emotional reaction to Apple's earnings is a mistake.

"While the Q4 miss - following management transition - may restrain near-term investor sentiment, we think the new management team should be given its opportunity to show what it can do," RBC Wealth Management analyst Mike Abramsky said in a research note.

Abramsky also pointed out several strengths that show why abandoning Apple stock now would be premature: "Apple's key franchises (iPad, iPhone) remain early and underpenetrated, with significant growth drivers (4G, China, emerging markets, enterprise, etc.) ahead," he said.

In fact, a comprehensive look at the company's fundamentals as well as its prospects shows that there's still tremendous potential for growth.

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