$26B Fund Manager, Chief Market Strategist, Analyst All Talk Apple Stock

on Jan 29, 2020
  • Apple's stock gained "only" 3%, according to a fund manager.
  • A notable strategist added that Apple's stock multiple expansion over the year was validated.
  • A Wall Street analyst said Apple's balance sheet is "gold plated."

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Amy Riskin is the Chief Investment Officer for Chevy Chase Trust and told CNBC in an interview she was surprised by Apple’s stock which gained “only” 3% after reporting a “phenomenal” earnings report.

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‘A Lot Already Baked In’

Apple’s status as a “phenomenal” company remains unchanged after its Tuesday earnings report but the muted reaction in the stock suggests there is “a lot already baked in” at current levels, Riskin said on CNBC’s “Halftime Report.” As the CIO of a $26 billion fund, her experience dictates now is not the time for investors to buy Apple’s stock.

Instead, the time to buy Apple’s stock is when “things aren’t going as well as people want,” she said. 

She also said her fund “periodically” trims its exposure to Apple’s stock as it grows to represent a bigger piece of the total portfolio.

Multiple Expansion ‘Warranted’

Apple’s strong gains over the past year were due to multiple expansion and Tuesday’s earnings report confirms this was “warranted,” Virtus Investment Partners Chief Market Strategist Joe Terranova added to the conversation on CNBC. The stock grew into its higher multiple by demonstrating a “fantastic” wearables business.

AirPods will represent the third-largest business for Apple in terms of revenue generation, he added. Even more encouraging to Apple’s multiple expansion story is that the majority of Watch buyers are not existing Apple customers. Coupled with Apple’s retention rate of 90%, the ability to capture incremental sales from Watch customers is tremendous.

Moving To Wall Street

Shifting over to Wall Street, Needham and Co.’s Laura Martin separately told CNBC that Apple’s balance sheet is “gold plated” and includes $207.06 billion of cash. The company’s successful quarter was made possible by the iPhone 11 series outselling every other smartphone in the market in every single week of the quarter.

Wearables are also considered an “on-ramp into the ecosystem” and this was consistent with the analyst’s research. As such, the case for Apple selling “more stuff” to each Apple customer can be made and justified.

“Anything that brings somebody into their ecosystem, Apple is figuring out a way to get paid more by these years.”

Finally, the company sold out of both Watches and AirPods in the quarter and the results can only get better when Apple bolsters its inventory. This would explain how Apple ended the quarter with 1.5 billion active devices which is up 100 million devices from last year, the analyst said.

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