“Despite my roots as a value manager, in recent weeks I have been a fairly aggressive buyer of Apple (AAPL) shares,” Chad Brand writes for Seeking Alpha. “Such an investment may not seem appropriate for a value investor but as the stock has steadily fallen, dropping below $250 per share, it has actually become quite undervalued. And not just relative to its growth rate, but the broad market as well.”
“Flush with $45 billion in cash and investments ($50 per share) and no debt, Apple sports an enterprise value of about $190 per share,” Brand writes. “Compare that to $15 of earnings this year and enough catalysts to make next year’s estimate of $18 seem easily attainable, and you have a stock that actually trades at a discount to the S&P 500. And therein lies the core explanation for my heightened interest recently. How can Apple trade at a discount to the market after factoring in their balance sheet?”
Brand writes, “The iPhone has been a runaway success… iPad seems to be catching on in the corporate world far faster than most had expected… Not only that, but I continue to expect that Mac sales will continue to grow. It is true that some iPad sales could cannibalize the laptop business at Apple, but I fully expect Apple’s overall share of the global PC market to continue to edge higher in coming years… Apple stock around $240 per share (today’s price) will likely prove to be a great buy a year from now. My personal target is $300 and it does not take overly aggressive assumptions to get there.”
Full article here.