This fall will be the 10th anniversary of Apple’s smartphone and a new phone with many bells and whistles will be coming. The stock has risen in one year from $92 to $133 can it rise another 40 points or more? Apple reported that after 3 quarters of declining revenue, revenue rose. The question is how much and why? Ian McGugan wrote an article on whether it can or not.

According to Mr. McGugan  Apple phones already count for one in every 5 smartphones sold worldwide. The company rakes in about 92% of the profits in the sector and has the largest cash reserve outside the US for tax reasons of any US-based company. (President Trump is considering lowering the tax rate for bringing the money back to the US which would be worth billions to Apple).

The launch in the fall is one of the reasons why the stock has gone up because the tech world and Madison Avenue know how to hype and most of believe the innovations of the future will make life better. The question is how do yo value the company? Aswath Damodaran loves to do business valuations (his blog is worth reading Musing on Markets) and he believes the valuation of $129 is good. This is below the $150 Goldman Sachs believes is reasonable. Mr. Damodaran would be a seller at $140.

Mr. Damodaran is the greatest corporate cash machine in history and is fully deserving its market value. However given its size, there is not a lot of room to grow. Thus Professor Damodaran believes the growth rate will be 1.5% a year for the next 5 years and operating margins will decline from 29% to 25%. Apple is being valued as a mature company not a growth company.

Linking to dividend paying stocks, Apple pays a dividend and generates cash, given the world still sees it as a growth company, the way to buy and sell Apple is on the swings. For growth investors will tend to sell as Apple’s growth is slow so the stock will decline. However, the margins are still very healthy which means the stock will go back up. Patience and thinking about dividend company swings between their normal highs and lows is what will make you capital gains and collect dividends along the way.

There are more questions than answers, till the next time – to raising questions.