Trading Nation

Why Apple could be set for a great 2016

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Apple's stock is on track to see negative annual returns for the first time in seven years, extending losses even further on Monday. But the shaky performance isn't a problem for some market watchers, who say that the popular stock won't stay down for long.

One common concern among investors has been slowing sales and shipments in its flagship product, the iPhone. But Erin Gibbs, equity chief investment officer of S&P Investment Advisory, said other Apple products should help bolster profitability as they gain traction.

"Right now we've seen a big hit because there's been some news of slowing iPhone sales," Gibbs said Wednesday on CNBC's "Trading Nation." "But we've known that even though iPhone sales make up about two-thirds of the revenue, a lot of the future growth is expected to come from non-iPhone products like the Apple Watch and the iPad."

Dan Ives, analyst at FBR Capital Markets, said while the Apple Watch has seen "choppy success" so far, the market for wearable gadgets should grow greatly in the next few years, led by Apple and other tech giants.

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"Apple's entrance into the wearables market has helped open up the floodgates for a number of other consumer wearable devices/applications all going after the $20 billion market opportunity over the next three years," Ives wrote in a research report Monday. "While it remains very early days, we believe wearables represent a major tangential growth opportunity in terms of the Internet of Things (IoT), which is expected to be the centerpiece of much technology innovation slated for 2016."

Ives also expects Apple to aggressively pursue opportunities in virtual reality. Other products that the company is betting on include the Apple TV, Apple Music and potentially an Apple smart car.

Despite lackluster response to its products this year, Max Wolff, chief economist of Manhattan Venture Partners, said investors will continue to put faith and money in Apple.

"As people get cautious but want returns, they migrate back to Apple, because it has the largest stock buyback program ever, because it has the largest cash hoard ever, and because it's the largest, most sustainable, high-margin electronics producer in the history of the world," Wolff said Wednesday on "Trading Nation."

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And even with the stock's decline, Wolff remains positive on the company's prospects.

"The innovation engine has stalled a bit," he said, "[But] it doesn't matter, because Apple is still vastly cheap and a cash machine compared to lots of peers trading at multiples that they don't deserve."

When looking at the company's valuation compared to the information technology sector, this could be a good time to buy, Gibbs said. Apple shares have fallen about 3 percent year to date, amid a down year for the broader market.

"When you also look at valuations, this is trading below its average, below the sector average. I really think it's a low-risk entry point at this point," Gibbs said.


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