“So what does the market actually expect out of Apple? We’ll use a DCF analysis to put the pieces together and see what Apple’s doomsday expectations look like,” Arnold writes. “Apple is currently priced to grow earnings by only 3% in the coming years, despite analyst expectations of over $80 per share in earnings in 2018.”
Arnold writes, “I understand that a big reason why Apple has fallen so precipitously is because when earnings estimates are falling and guidance disappoints, no one knows where the bottom is and nobody wants to be caught holding the bag. However, when shares have gotten so preposterously cheap, it is hard to ignore. If we look at priced-in expectations, we can see that as long as Apple can exceed three percent earnings growth for the foreseeable future, shares should outperform. In addition, if we assume that Apple will make $80 per share in earnings in 2018, even at the ludicrous valuation of 8 times earnings, shares should trade at $640, or roughly 40% higher than they are today. If we apply a 10 times earnings multiple, shares would trade near $800.”
Read more in the full article here.
[Thanks to MacDailyNews Reader "Fred Mertz" for the heads up.]
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