Why Apple Stock Gained 11% in 2016
What happened and why the stock price has a good chance of rising further in 2017.
What happened
Apple (NASDAQ: AAPL) finished 2016 strong, gaining about 5.8%. The nice increase toward the end of the year helped the stock clock a 10.9% rise during the year, according to data provided by S&P Global Market Intelligence. While the increase is notable, investors should put the move into perspective by considering that the S&P 500 increased by about the same amount during this period.
So what
Apple's gain for the year didn't come without some volatility. In May, the stock had fallen about 12.5% as investors considered the implications of the company's falling revenue and earnings per share. Concern particularly mounted after Apple reported its fiscal second quarter results in April, highlighting a 13% year over year decline in revenue and an 18% year over year decline in earnings per share. Investors also questioned the company's ability to grow revenue and EPS from current levels.
But as the year went on, signs that Apple's iPhone 7 launch may be faring well, optimism about the company's 2017 iPhone launch, and Samsung's Note 7 recall all gave investors reasons to be more optimistic (not to mention Apple's conservative stock price, which arguably already prices in business growth headwinds).
Now what
Going into 2017, the best thing Apple stock has going for it is its valuation. The stock trades with a price to earnings ratio (P/E) of just 14. This compares to the average 25 P/E of stocks in the S&P 500. While it's impossible to speculate where the stock will go in 2017, Apple stock looks compelling with a valuation like this.