Rosier Apple

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Apple a Buy Under $400

Remember when Samsung (SSNLF) was heralded as the iPhone slayer as its sales boomed and Google’s (GOOG) Android OS was seen as the second coming? Remember when Jeff Gundlach put a $425 target on Apple (AAPL) shares, and then pundits –  including yours truly — wondered whether Apple stock’s best days were behind it?

Well, that’s ancient history now.

Because just like those headlines hinted at the tumble that was to come — taking Apple from over $700 a share to under $400 in just a few months — the current headlines might hint at a recovery for Apple stock.

It might not be quick or dramatic, of course, but the news hints that the worst is likely over. Consider the following:

Samsung Struggles: Samsung has been gutted as its flagship Galaxy S4 hasn’t performed up to Wall Street forecasts. As a result, investors have fled Samsung stock, sucking out more than $25 billion in market capitalization from the Korean company as shares have flopped 15% in just over a month. JPMorgan Chase and Morgan Stanley both cut sales forecasts and cut profit estimates — and that means someone stands to benefit from the shortfalls. Perhaps Apple?

Apple Upgrade: Apple stock was already rated “outperform” by Raymond James, but on Monday analysts there upgraded it to “strong buy.” An analyst note reportedly said “near-term financial trends will stabilize and then improve following the June quarter,” which just ended. Raymond James upped its iPhone shipment forecast for the latest period by 1 million to 28 million units. This comes after Oppenheimer reiterated its “outperform” rating on June 25, and though it dropped its price target slightly, it still predicts AAPL stock will hit $460 — 15% up from here.

Lower Margins but More Sales Pending: The narrative of increased shipments is not just one Raymond James is pushing. Continued rumors of low-cost iPhones or the iPhone Mini hint that Apple is moving away from its premium product lines and into a more populist niche. This has been a difficult transition for investors, but might help win over investors. After all, Amazon (AMZN) has been thriving by playing a game of volume and not profits … why not Apple?

How Much Worse Can It Get? Whether it’s financial stocks like Bank of America (BAC) or tech flops like Hewlett-Packard (HPQ), eventually sentiment gets so bad that there aren’t any sellers left. With a $100 billion share buyback and dividend plan, a forward price-to-earnings ratio of less than 10 and a current dividend yield above 3% … isn’t it time to consider staking out a position now that all the bad news is already out and shares have had months to adjust?

I’m not saying Apple is a sure thing. Perhaps it will move sideways for a little while longer — and as a result, I think waiting until another dip under $400 might be prudent.

But long-term, I’m starting to think the tide is turning back in Apple’s favor. And with a 3% dividend, you have some incentive to ride this one out.

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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

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