The big question

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Is Apple Stock a Buy?

Well, another week goes by, and another big move takes place for Apple (NASDAQ:AAPL).

Shares have rallied in the wake of Apple’s earnings report, when we found out both the top and bottom line beat estimates in Q2. Apple stock is up about 10% since that April 23 announcement.

But this came amid the first profit decline at Apple in more than a decade thanks to predictably shrinking margins.

Earnings were the typical good-news/bad-news scene that has been so common for Apple — which only adds to investor confusion. Is Google (NASDAQ:GOOG) Android really converting iPhone and iPad users, or are gadgets like the Amazon (NASDAQ:AMZN) just competing on cost?

Is Apple a great long-term buy thanks to massive cash stockpiles and reliable cash flow, or are we seeing a company paralyzed by unrealistic expectations and a failure to continue its track record of innovation?

Will BlackBerry (NASDAQ:BBRY) phones eat up enterprise sales — or, for that matter, will Microsoft (NASDAQ:MSFT) Surface tablets — or can AAPL figure out how to woo corporate IT geeks?

These are just a few questions that investors have on their minds when debating the merits of Apple stock. Here are a few more issues worth noting:

Quality Control: Apple took some heat recently for sending as many as 8 million subpar iPhones back to Foxconn. This is news not just because of the sheer size of the shipment and because of previous concerns that Apple was suffering from a production bottleneck for the iPhone 5, but because it smacks of the “un-Jobsness” that some fear has crept into AAPL. The Apple Maps debacle and other high-profile missteps could be a cause for concern if the biggest selling point for Apple is its premium interface that is so user-friendly.

iBonds: Apple has $140 billion in cash and investments, so it hardly needs to beg for spare change. But with debt so cheap, the company decided to float a $17 billion bond offering to fund an ambitious share repurchase plan and dividend scheme to return $100 billion in capital to shareholders by 2015. The move is very shrewd; consider AAPL got 30-year debt at just 3.883% and 10-year debt at 2.415%. Both of those rates are only marginally above current inflation levels … so it’s almost “free money” for Apple to play with.

Price Cuts: Apple just reduced the prices on its iPads, which has many speculating that a new line of devices is due out this summer. Similarly, there are rumors that a cheap iPhone will hit the market this year. This strategy of attacking the lower-end market flies in the face of previous Apple strategy that involves premium devices for premium prices … but since AAPL is already losing the war on margins, it appears the company is prepared to play the volume game now instead. That’s a different animal and could go either way for Apple.

So how does all this add up?

Well, I think a long-term investment in Apple might serve you well from an income perspective. AAPL’s dividend yield is around 2.8% after the recent increase, and it is difficult to imagine the company slashing or eliminating that payout anytime soon. However, the growth picture is pretty grim, and I doubt Apple has much momentum when it comes to growing earnings or sales. That means share prices will stay pretty flat or track the market.

As such, I don’t see a compelling reason to buy Apple — especially after the stock’s recent pop. Anything around $400 might be a decent entry price for Apple, since I wouldn’t be surprised to see it set a new 52-week low sometime this summer if bad news and a bad market conspire to hold AAPL back.

In short, shop around and don’t grab at Apple unless shares roll back. It might be a decent long-term investment … but it’s going nowhere in the short-term, and the future remains too uncertain to go stock-chasing right now.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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