Why Apple may be a ‘port in the storm’

Economic and market trouble in China, where Apple has long chased sales growth, has clearly harmed sentiment in the stock over the past few months. But such concerns are misplaced, some analysts and investors maintain.

For the tech giant, "the risk is that we do get macroeconomic slowing as a repercussion to what's happened in China," Alex Gauna, an analyst covering Apple for JMP Securities, said Monday on CNBC's "Power Lunch." "But even if that does happen to be the case, JMP would argue that this is one of the safest ports in the storm," due to its modest valuation and financial strength.

"It's trading at a discount to the market multiple, dividends are rich and increasing, and the company has a fortress balance sheet with which to innovate," pointed out Gauna, who rates the stock "market outperform" with a target price of $150, which is nearly 30 percent above current levels.

Zachary Karabell, head of global strategy at Envestnet, provided an additional reason why macroeconomic concerns may prove to be overplayed.

"Apple depends for a lot of its forward growth on the consumer not just in China but throughout the emerging world, and if that story is fundamentally broken, that may be a problem," Karabell said Monday on "Power Lunch."

"Unless, of course, you treat the smartphone as a utility, which I do," Karabell said. "Meaning, the world may fall apart and people will still need to spend whatever marginal income they have, and maybe income they don't have on these devices."

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A pedestrian passes an Apple store in San Francisco.
Robert Galbraith | Reuters
A pedestrian passes an Apple store in San Francisco.

That said, even if he wished to avoid the shares, the average investor may be hard-pressed to do so.

"The fact is, none of us have a choice but to be in Apple, because if you're in any index fund, you're in it anyway," Karabell said.

Apple shares make up nearly 4 percent of the popular SPDR S&P 500 ETF (SPY), and more than 13 percent of the PowerShares Nasdaq 100 ETF (QQQ).

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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