Should You Buy Apple Stock?

My colleague Farhad Manjoo says you should, and since I bought some AAPL shares recently I obviously agree with him. I think this chart from Horace Dedieu nicely summarizes the view that there’s plenty of growth potential here. The iPhone is their number one product, but the iPad is actually an even more successful product out of the gate:

But I do think it’s worth emphasizing that to go from optimism about Apple’s profit trajectory to optimism about Apple’s share price does require some extra steps. My view is that in this era of depressed bond yields, if Apple started paying a dividend its share value would leap upwards as it would be really sweetly positioned on the risk/reward curve. But as long as they don’t do that, people are going to keep discounting the value of a revenue stream that may end up being squandered on some ridiculous failure—Apple’s yet-to-be-devised version of Microsoft’s Bing sinkhole. Note that for all that Microsoft has become an unfashionable company, it’s hardly an unsuccessful one. Its core operating units as of 1999—selling Windows and selling Office—are still huge cash cows.

Which is all just to say that hard as it is to forecast events in the real economy, it’s that much harder to forecast events in the financial markets. There’s a cloud of pessimism hanging over Apple’s share price right now, and while I have a pet theory as to what’s causing it nobody really knows and it’s not obvious that another year of blockbuster sales would dispell it.