Dear Fellow Investor,
If you're familiar with The Motley Fool, by now you probably know that we march to the beat of a different drum.
You see, unlike the "pros" on Wall Street, we don't let short term news, talking heads, and stock price gyrations guide our investing decisions.
Instead, we stay laser-focused on the long term, picking winning businesses positioned to reward investors for years to come.
To show you what I mean, let's take a look at Apple using the exact same approach the analysts at our flagship Motley Fool Stock Advisor premium service use to uncover winning stocks.
We call it 5 Green Flags, 3 Red Flags – or 5 and 3 for short.
For Apple, the green flags below represent five areas you can watch to make sure the company is making the kind of progress us long-term investors like to see.
Five Green Flags for Apple
- iPhone sales continue to exceed Wall Street's projections.
- iPad captures a 40% share of the global tablet market.
- Gross margin stabilizes in the mid-to-high 30% range.
- A deal with China Mobile to bring the iPhone to its more than 700 million customers boosts Apple's lagging sales in the Middle Kingdom.
- Apple unveils a successful new product – whether it be an iWatch, actual Apple TV, or something else entirely – that reinvigorates the brand and proves that innovation is alive and well post Steve Jobs.
On the other hand, the red flags represent potential risks long term investors like you and I need to keep an eye on. If Apple violates these red flags, it might be time to rethink our position on the stock.
Three Red Flags for Apple
- Market saturation at the high-end and cheaper competition at the low end results in sagging iPhone sales, particularly in emerging markets.
- Apple endures lower average selling prices and crumbling gross margins as competition from lower-priced tablets take their toll.
- New products fail to resonate with consumers, resulting in a loss of brand prestige and reduced pricing power.
Our analyst team then considers these factors, along with other analysis tools like our proprietary risk rating approach, to figure out whether Apple is a stock worth buying for the long term.
Is Apple a Buy?
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