Apple (NASDAQ: AAPL) has been riding a wave of good news, with the stock closing above $600 yesterday for the first time since October 2012.
Just a month ago the Apple stock price was under $525. Shares are up almost 15% in the past eight trading sessions alone. After a blowout earnings report, Apple is back in the spotlight. But the April 23 earnings report doesn’t tell the whole story.
Here are the three reasons why the Apple stock price is above $600.
1. Blowout earnings and shareholder friendly commentary
It’s no secret that Apple’s impressive April 23 earnings report is the root cause for the recent rise in Apple’s stock price.
Specifically, the company beat expectations for earnings-per-share, iPhones sold and revenue. The company also increased its stock buyback program by 50%, a stock buyback program that had already been the largest in history. Further pleasing investors, Apple also announced that it was going to increase its dividend by 8%.
Another key moment from that day came during the conference call, when I heard the incoming CFO state that the company intends to raise its dividend every single year.
What I heard on the conference call told me something very important:
Apple isn’t just another technology company with a dividend. Apple is now a dividend growth stock with huge opportunities in the technology industry.
2. Apple sells $12 billion in bonds
In an effort to keep its overseas cash reserves where they are and avoid paying taxes on it in the U.S., Apple once again issued bonds. The debt offering is intended to fund the company’s massive dividend and buyback programs discussed above.
As with Apple’s original bond offering, the market was enthusiastic about owning Apple’s debt.
The offering was originally expected to be around $8 to $10 billion. But with $40 billion worth of orders entered, Apple had no trouble selling $12 billion in bonds.
Large firms like Prudential, Conning, BlackRock (NYSE: BLK) and Invesco (NYSE: IVZ) were among the institutions buying Apple’s debt.
“The bonds are an attractive alternative to Treasury Bonds,” said the head of Invesco’s U.S. investment grade portfolio division.
This is as much a sign of the market’s confidence in Apple’s stability as any other. For investors to consider Apple’s debt a higher-yield alternative to Treasury bonds is hugely positive for the company and has helped fuel the rally in Apple stock.
3. New product rumors ramping up
Once again, Apple is in the rumor mill. While we’ve been expecting an AppleTV for some time now, it seems almost certain that an iWatch or other wearable technology is around the corner.
Reuters reported yesterday that Apple has been on a hiring spree lately. And who exactly is Apple hiring?
Apple is building a team of medical technology experts, recruiting at least half a dozen well known biomedical experts, according to yesterday’s report.
It has long been reported that Apple is recruiting experts in medical sensor technology. It seems likely that Apple is building a product that will monitor much more than just fitness levels, the kind of “smart pedometer” that exists on the market today.
Apple is building a device that will monitor blood pressure, heart rate and even blood-glucose levels. Considering the rise of diabetes and the inconvenience associated with monitoring it, this could lead to massive adoption of the iWatch among the 25 million Americans with the disease.
Apple Stock Price: The Bottom Line
At the moment, everything is going right for Apple.
Earnings blew past expectations and the shareholder-friendly policies have brought new investors to the stock while restoring confidence in long-time investors.
Apple’s bond offering acted as a litmus test for how the market perceives the tech giant’s stability. And the company passed with flying colors.
Every day, the iWatch is looking more like a groundbreaking new product and not a mere improvement to what is already available in the marketplace.
With all of the positive news for investors to digest, it comes as no surprise to me that the Apple stock price is above $600.
DISCLOSURE: I personally own Apple stock.
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