Apple’s iPhone shipments in China grew 18.7% year over year in December to roughly 3.18 million units, according to Bloomberg. (Bloomberg’s calculations are based on data from the China Academy of Information and Communication Technology, a government think tank.
The growth rate is especially impressive given a drop in overall smartphone shipments in China of 13.7% ear over year in December.
Back on December 12 I got a fair amount of push back from readers when I named Apple as my #6 bargain pick in my Special Report 12 Bargain Picks NOW on my JubakAM.com subscription site.
Readers rightly noted that Apple, which had long been cheap in comparison to the over all market with a price to earning ratio of 9 to 12 was no longer so. The stock traded today January 9 at 22.88 times forecast earnings per share for the next 12 months. The forward PE for the Standard & Poor’s 500 as of December 31, 2019 was 23. And they pointed out the stock was trading $271.46 and my 15% undervalued call would require the stock to move to $312 or so. Which would be above the stock’s all time high of $310.43.
So how could shares be a bargain?
Because, I argued, preliminary forecasts for sales of the iPhone 11 in China were coming in above Wall Street estimates. Which meant that the stock would climb once analysts started to play catch up to the data with their price targets.
Which is pretty much what has happened over the last month. Apple shares closed today, January 9, up another 2.12% to $309.63 a share.
The big question now is how far they will run in anticipation of earnings for the December quarter. Apple is scheduled to report earnings for that quarter on January 28. My inclination now would be to be out of the shares by that date. I’d remind you all that the December quarter is Apple’s strongest of the year and that the company will be headed into historically weaker periods. (Even though “everybody” knows this, this seasonality still moves the shares.)
Today on the good China news for Apple, shares of companies in the Apple ecosystem moved up too with Cirrus Logic (CRUS) gaining 1.25%, Xilinx (XLNX) picking up 2.35%, and Skyworks Solutions (SWKS) ahead 0.09%.
Apple is a member of my long-term 50 Stocks Portfolio. The shares are up 178.80% since November 8, 2016.
Shares of Cirrus Logic, Xilinx and Skyworks Solutions are members of my Volatility Portfolio on my JubakAM.com and JugglingWithKnives.com subscription sites. Those shares are up 54.27%, 8.25%, and 51.,46% since I added them to that portfolio on October 15 for Cirrus Logic, October 8 for Skyworks, and November 6 for Xilinx.