Warren Buffett had said “Be fearful when others are greedy and greedy when others are fearful.” When Apple Inc. (NASDAQ:AAPL) was worth $700 a share, people couldn’t stop raving about the stock, and now that it has fallen to $400, people are bearish saying Samsung and Google Inc (NASDAQ:GOOG) are taking over. This may be the perfect example of Buffett’s quote put into practice, buying when others are fearful.
Let’s look at the facts: Since 2008, Apple revenue has grown 380%, net income has grown 760%, operating cash flow has increased 430%, and Free Cash Flow has grown 370%. Apple is the epitome of a growth stock, and the Street thinks the growth is over. I think it isn’t.
Presently, the public sentiment is that there’s nothing that competitors haven’t done as well or even better at. Google has made Android a fierce competitor to iOS, taking 51.2% of the market compared to Apple’s 43.5% of the market, according to CNET. That’s an increase from last year for Android and a decrease for iOS. With data like that, Wall Street has the right to be fearful for Apple Inc. (NASDAQ:AAPL). However, they’re missing an important factor in their analysis: The unknown products Apple could sell in the future, the innovation.
In Apple’s recent quarterly release, CEO Tim Cook hinted at new products in software and hardware in the fall. Short-term investors may be disappointed with the fact that no updates will be released until then, but long-term shareholders will see the stock react to the new innovation.
Apple Inc. (NASDAQ:AAPL) is heading into the year with very polished versions of its iPhone, iPad, and iPod lines. All of their products are fast, thin, and look great. In order for them to continue at the rate that they have been growing, they need to release a new product or innovate in a completely new market.
Apple has taken steps to reward shareholders in the form of a $100 billion share buyback and dividend plan. This is more than double than the previous plan and longtime holders will be rewarded. This, along with the upcoming releases of new products, is why there is still plenty of growth left in Apple Inc. (NASDAQ:AAPL).
Unlike Apple, Google Inc (NASDAQ:GOOG) doesn’t necessarily need to buy shares or institute a dividend, simply because they’re innovating at a faster pace than Apple. Products like Google Fiber and other initiatives like driverless cars continue to propel the company forward. At present, Google Inc (NASDAQ:GOOG) seems to have more going for it than Apple Inc. (NASDAQ:AAPL).
That is exactly why this is a great time to buy Apple: The stock is beaten down and the Street is fearful that the company won’t be able to innovate. If history has told us anything about the company, it will continue to innovate (Cook has already said they have products in the works) and the stock should rebound.
Another example of Buffett’s quote is Yahoo! Inc. (NASDAQ:YHOO). Yahoo! Inc. (NASDAQ:YHOO) is down about 46% since its high in the beginning of 2006. If you look at their financials, sales are down 30% since 2008 and Free Cash Flow was negative in 2012. The company doesn’t seem to be doing well, but the important part to look at is that Yahoo! is innovating.
They launched a new homepage, and there are rumors that they will partner with Apple to provide news, weather, stock, and sports updates more seamlessly. If Yahoo! Inc. (NASDAQ:YHOO) does partner with Apple, they could compete much more efficiently with Google, which is the go-to company for accessing information.
There are many great things to come for Apple Inc. (NASDAQ:AAPL), and when the news of a new product or service comes out, Apple should be able to maintain its growth, and the stock should follow suit.
The article This Is an Opportunity to Buy Apple originally appeared on Fool.com and is written by Alec Eiber.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
