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Apple has its mojo back

December 4, 2013: 12:41 PM ET
Shares of Apple have roared back to life after bottoming in April. iBulls have the upper hand over iBears.

Shares of Apple have roared back to life after bottoming in April. iBulls have the upper hand over iBears.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

The battle between iBulls and iBears over the direction of Apple's stock has been fascinating to watch this year.

For most of 2013, the animals of the more ursine variety were trouncing their taurine rivals. But the tables have turned.

Apple (AAPL) shares have enjoyed a stellar rally over the past few months, surging nearly 50% from the 52-week lows they hit back in April. Amazingly enough, Apple's stock is now up 6% year-to-date.

The Apple bulls have several reasons to feel vindicated.

It looks like an official deal with China Mobile (CHL) to bring the iPhone to the largest wireless carrier in China may finally be getting closer to reality.

And despite the big jump in the stock over the past few months, it's still cheap. And legitimately cheap. Not cheap in an iPhone-5C-is-cheap-just-because-it's-not-as-pricey-as-the-5s kind of way. The stock trades for just 13 times fiscal 2014 earnings estimates.

To put that in perspective, Apple is trading at discount to Microsoft (MSFT), which is valued at nearly 15 times fiscal 2014 profit forecasts. Call me crazy. But doesn't Microsoft's future look a lot cloudier than Apple's?

Apple does seem to have momentum on its side again. Sales of the latest iPads are expected to be strong during the crucial holiday shopping season. And analysts have been busy raising their earnings forecasts for the current quarter and fiscal year as a result.

Related: iPad Air was a big Black Friday winner

According to data from FactSet Research, the consensus earnings estimate for Apple's fiscal first quarter (which ends in December) is now $14 a share. At the end of August, analysts were expecting a profit of just $13.41 a share. For the full year, Wall Street expects Apple to earn $43.38 a share -- up from a consensus of $42.44 in August.

And those numbers may be too low. If you look at Estimize, a site that crowdsources estimates from a wider array of investors that includes traders and institutional money managers, the consensus estimates for the first quarter and all of 2014 are $14.55 a share and $44.66 a share, respectively.

What's more, Carl Icahn (love him or hate him) has clearly put a floor on the stock. Shares of Apple are up more than 20% since the activist shareholder first tweeted on August 13 that his Icahn Enterprises (IEP) firm has a "large position" in Apple and that he thought the stock was "extremely undervalued."

As the chart below shows, Apple's performance has trounced the Nasdaq's (and it hasn't exactly been a slouch) over the past four months or so.

Now Icahn may not convince Apple CEO Tim Cook to raise its dividend or increase its stock buyback program. Then again, Apple does have $146.8 billion in cash burning in its iPocket, so why not throw Icahn and other shareholders a bone?

Even when you account for the fact that much of Apple's cash is parked overseas for tax reasons, this is a company that can clearly afford to boost its quarterly payout, buy back more stock and still have plenty left over for investing in the company's future through acquisitions, capital expenditures and research and development.

Related: Apple spends less on R&D than Microsoft

Which brings me to my final point.  If Apple is ever going to get back to the all-time high above $700 a share that it set in September 2012 shortly after the launch of the iPhone 5, it's not going to do it just through share repurchases and dividends.

For Apple to do that, it probably will need to prove to some skeptical investors that it has another new product category or two up its sleeve. The big knock on Apple for most of 2013 has been that it is no longer innovating. It is merely spitting out updates of iPhones and iPads every year or so.

But that perception can change.

Just look at Google (GOOG). A few years ago, it was facing some of the same challenges and questions that are currently dogging Apple.

Investors erroneously thought that Google's best days were behind it because the company was apparently a one-trick pony (search) that was starting to lose relevance in the social media revolution being led by Facebook (FB) and Twitter (TWTR).

But Google invested heavily in mobile. And now its Android operating system has supplanted Apple's iOS as a market share leader. Google has also done a great job expanding into video advertising with YouTube and continues to dominate search. That one-trick pony has turned out to be a Man O' War.

Add that up and Google is trading near its all-time high. I pointed out last week that Google could soon pass Exxon Mobil (XOM) in market cap. If it does that, Google would be the second most valuable company in the U.S. -- trailing only Apple.

Related: Google isn't exciting. So?

So can Apple pull a Google? I see no reason why it can't. It's hard to believe that Apple has nothing new in development. Rumors have run rampant for years (even before Steve Jobs passed away in 2011) about Apple looking to disrupt the living room with an iTV. We're still waiting for the mythical iBoobTube though.

There has been chatter about Apple jumping aboard the wearable tech craze. An iWatch perhaps? There's been speculation that Apple could be working on an iCar. One analyst has even suggested that Apple should buy electric carmaker Tesla (TSLA).

That may be overly ambitious. But you'd have to think that Apple has something that could be the next proverbial big thing.

Now all Apple has to do is bring it to market. Considering that the company hasn't introduced a new product line since the iPad in 2010 -- following the first iPhone in 2007 and first iPod in 2001 -- the company seems overdue for a splashy product launch.

And if that happens in 2014, then Apple's stock could easily climb back above $700. After all, it's now less than 20% below its record high.

The bear market in Apple's stock is over.

  • Apple tops $500. Thanks, Carl Icahn!

    Cue the Apple "iCahn" jokes. Apple's stock topped the $500 mark Wednesday for the first time since January. Shares moved higher for a second day on the news that activist investor Carl Icahn has taken a "large" position in the company.

    Shares crossed the psychologically important level and climbed as high as $504.25 in afternoon trading, before settling just below the mark at $498.50.

    Still, the recent gains have boosted Apple's value by MORE

    - Aug 14, 2013 4:10 PM ET
  • Investors unfriend Facebook and Apple

    U.S. stocks may be on the rise but two former tech darlings are missing out on the move up. Shares of Apple and Facebook were firmly in the red Wednesday as the the Dow jumped more than 100 points for a second straight day.

    Apple (AAPL) slipped 1.4% to a two-month low below $400, while Facebook (FB) shares shed 0.4% to trade around $24.

    Both companies have been struggling to impress investors this MORE

    - Jun 26, 2013 1:30 PM ET
  • Apple slides below $400

    Apple. That bright and shiny tech darling continues to taste a little sour.

    Shares of Apple (AAPL) fell below $400 for the first time since mid-April early Monday. The stock has struggled to stay above that mark all year and with some good reason.

    It's lost some patent battles against Samsung, and just ended a three-week e-book trial that bordered on the absurd. (Five juicy details from the trial)

    But let's walk it MORE

    - Jun 24, 2013 1:12 PM ET
  • Apple's Tim Cook is Wall Street hero for a day

    While lawmakers took turns bashing Apple (AAPL) for its creative tax policies, investors were cheering on CEO Tim Cook as he defended the company and pushed Congress to overhaul the tax code.

    The general consensus among traders on StockTwits was that Cook looked like a capable leader compared with the elected officials doing the questioning.

    Catwoman2011
    Long Tim Cook. Short John McCain. $AAPL

    RobertinGatos
    $AAPL Tim Cook did great MORE

    - May 21, 2013 2:29 PM ET
  • I lost $2,000 on Apple, but still betting on recovery

    When 21-year old Tom Pszeniczny decided to make his foray into investing, he figured Apple was a pretty safe bet.

    In the days leading up to the iPhone 5 launch event last September, the Drexel University student bought six shares of the iPad and iPhone maker for $665 a piece.

    While Pszeniczny wasn't looking to make a quick buck, the following week seemed promising. On the day the iPhone 5 went on sale, MORE

    - Apr 22, 2013 8:03 AM ET
  • Apple panic: Down 6%, falls below $400

    Move over Bitcoins and gold, Apple (AAPL) is the latest investment to succumb to panic selling.

    Shares of Apple plunged as much as 6% Wednesday afternoon and hit a new 52-week low of $398.11 in the process. Shares recovered a bit as the day wore on and closed just under the $403 mark. But Apple's stock is now down almost 25% this year and is more than 40% below the all-time MORE

    - Apr 17, 2013 4:32 PM ET
  • Worst may finally be over for Apple

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    In like a lion and out like a lamb may apply to the weather in March, but not to Apple's stock.

    Apple (AAPL) limped its way into the start of the month. Shares hit a 52-week MORE

    - Mar 19, 2013 11:57 AM ET
  • Einhorn to Apple: Give us more cash!

    Activist investor David Einhorn publicly called for Apple (AAPL) to give some of its $137 billion cash hoard to back to shareholders in the form of preferred stock.

    Einhorn said in a press release Thursday that he has held meetings with Apple executives explaining how they could unlock "several hundred billions of dollars" by distributing a perpetual preferred stock. Apple, he said, rejected the proposal in September 2012.

    "Like many other shareholders, Greenlight is dissatisfied with Apple's MORE

    - Feb 7, 2013 4:00 PM ET
  • Investors hoping Microsoft lives up to the hype

    Microsoft (MSFT) reports earnings after the bell and investors are hoping the tech giant hasn't overpromised.

    Shares were up about 1% Thursday afternoon. The stock has had a rough year, what with flagging Windows sales and all, but Microsoft is hoping to turn things around. And this may be its time to shine.

    Windows sales have slowed for four straight quarters (year over year), but the advent of MORE

    - Jan 24, 2013 2:33 PM ET
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