Apple stock seems insanely cheap: Where’s the love?

“For all the fanatical devotion to Apple among both customers and Wall Street analysts, the stock trades at what by almost any statistical measure appears to be an insanely low valuation,” Eric Savitz reports for Forbes.

“Bernstein Research analyst Toni Sacconaghi did some analysis of the situation in a report this morning,” Savitz reports. “The company, he notes, trades at 11x calendar 2012 earnings, or about a 6% discount to the market.”

Savitz reports, “He also asserts that Apple’s earnings are understated by about 8% due to conservative tax accounting and low interest rates, which suggests the stock is really trading at a 14% discount. The last time the stock traded below the market multiple on a price/forward earnings multiple was in late 2000.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Sarah” for the heads up.]

20 Comments

    1. Im going to have to disagree with you. Don’t get me wrong I love AAPL, and I’ve been in AAPL since 2001. The problem now lies in how large Apple has become. Since 2001 if you had put half your salary into AAPL, yes you would have been rich as the stock has gained around 40x. If you are just now getting into investing, it’s not as appealing. For even a 2x gain, Apple will have to go to 800. I suspect Apple will continue to grow for the foreseeable future, but not at a clip that will net the multipliers we have seen over the last decade.

      The question for investors now becomes which stock can I put my money into that’s going to give me a 5x, 10x or even 20x gain over the next several years. AAPL is not that stock.

      1. So true, BOTOH, AAPL now has enjoyed linear growth since 2009 (and, if you will, since 2002, with a 1 year hickup in 2008, when it lost 50% from the extrapolated curve).
        Indeed, linear growth at $400 means a lower relative growth in 2012 (25%/yr) than in 2009 (100%).
        AAPL is somewhat below its general trend now, but when it picks up the curve, it should be at $450 soon, with fluctuations of ±$50 over 3 month time spans. So if you are planning to sell AAPL in the next few months, don’t put your limit below $500.

  1. I’ve been saying it for awhile- but what happens when the cash value of the company is at parity to the stock value? It certainly seems like it could happen at this rate.

  2. There is no love, just moronic jealousy and hate.

    Oh, and paid guns for hire to spread BS in order to support the status quo that is the Dells and Microsoft and HP, Asus and Samdung etc. Too many people with livelihoods dependent on the old PC world.

  3. I’m a big apple fan and aapl investor. (I suspect I’m going to get flamed) but I have to say I think aapl will go up if Apple declares a dividend, a stock split and if Apple would talk to investment managers in banks etc more.

    1) there is only a limit to investment monies. Apple is a giant company and the slow growth of share price vs revenue growth shows that many people who like aapl have already bought in. Aapl needs NEW customers and one way to get it is to declare dividends. Many people will simply not buy stock (regardless of growth rate) if they don’t give dividends. Many pensioners for example dont want to sell their stock but just live off dividends. Declaring dividends will also allow aapl to be included in hundreds of dividend mutual, hedge and pension funds (i.e new customers). In a ‘recession’ atmosphere many financial managers are urging their customers to buy only dividend funds (“if stock prices aren’t going up at least you have dividends”). (Pleae don’t kill me!) I’m not saying pay out so much it would jeopardize apples ‘sacred’ cash pile for component purchasing etc but apple makes so much cash every quarter probably some of it can be used for dividends without danger. Much less cash rich companies can provide dividends.

    People who scream at me “apple should NEVER pay dividends” I ask you.. where are the NEW aapl investors going to come from ? apple’s market cap is so big it needs a lot of new investment to significantly push the price up.

    2) stock splits don’t intrinsically add value to a stock but it does encourage more people to buy . Some people might want to purchase apple stock, perhaps after having bought apple products, but the near $400 turns them off. Actually many more small holders of apple stock might not be a bad idea because it’s likely stock holders will ALSO tend to continue to buy apple stuff (like MacBooks, iPads).

    3) apple needs to talk and sooth (the often tech stupid) analysts and financial managers of banks, pension funds, mutual funds etc. These guys have billions of bucks of investment monies at their disposal but they need sucking up to (unfortunately). Steve Jobs had no interest in them: he had a buck a year salary and no stock options since 2003, Jobs always said aapl investors have been well served by the stock increasing thousands of percent under his tenure so he wasn’t going to work hard at catering to fund managers. But the stock growth is now slowing and the P.E compressed (from around 30 to around 10 now ex cash). Apple needs to do something to broaden the attractiveness to big investors: most other big companies run investment seminars etc.

    Like I said no new investment no growth in stock price.


    and for the many posters I’ve read at MDN who say ‘apple should f*ck the shareholders’ I’ll like to say apple has a fiduciary responsibility by law to the shareholders and the shareholders are actually the owners of the company.

    Apple is a superb company run by very smart people and long time aapl investors have been amply rewarded but it’s silly that companies like amazon have P.E at over 100 and apple is at 14 (less ex cash)

    1. Im going to disagree with you, then contradict myself in the very same reply… A split SHOULD NOT in and of itself encourage people to buy the stock, simply because of what you said. It doesn’t intrinsically add any value to the stock by splitting. If someone has money to invest and doesnt understand why buying one share at 400 isn’t any better than buying 2 shares at 200, then they shouldn’t be investing in the first place. IF they do know, then i suspect something else is holding them back from putting their money down.

      Still, you have to wonder if a split wouldn’t remove a psychological barrier preventing the stock from being fairly valued. Im not in favor of Apple splitting the stock, but if they do it would be interesting to see how that affects the overall value of the stock.

      1. I agree with some of what you say (and its a thoughtful response).

        but I have to add this about stock split
        for example there are lots of young people who now buy apple products. They might be able to afford a couple of hundred bucks a month to invest and would like to buy appl: there’s just a psychological barrier to save up and plunk it all on a single 400 buck share. So many low income people are happy they bought a few hundred shares of something at a buck each.. (shrug?). Or if they had say 3000 total to invest their banker might tell them to diversify it instead of buying a handful of apple shares.

        I always admired Warren Buffet but his Hathaway shares are over 100k each. If they were cheaper I might have bought in but they simply too rich for me.

        1. Back in the day, when you had to call a broker and buy stock in even lots of 100, splits were great. Now with the ability to buy even a single share through an online broker, or even partial shares through a site like Sharebuilder (a method I don’t condone) people can still put their money down on shares of AAPL.

          However I suspect people who only have enough money to buy one share or a partial share have better things to plunk their money down on. I doubt there’s a huge demand for this sort of investing. People who have a few hundred dollars are better off putting their money in a mutual fund, possibly one that includes AAPL if they really want to invest in the company.

          1. Regardless of what people are able to do these days, most people still THINK in terms of share units. The market is mostly psychology, and a lower share price is psychologically a plus for many investors. I have seen a tremendous appreciation in my AAPL stock (from $18 plus two splits) but as I get older I would appreciate a dividend, and it would induce me to add to my AAPL holding.

    2. 1. Companies issue shares to raise capital. Apple has all the cash it needs.
      2. The share price doesn’t affect Apple because they have no foreseeable need to issue more stock and likely plenty of time and working capital to address that well before it would matter.
      3. Wall Street wants a low stock price and variable dividends so they can ‘churn’ the stock (artificially create buying/selling activity because that’s where they suck money out) with all the stupid analysis and predictions.
      4. Basically, Apple’s stock price is a reasonable reflection of the marketability of the SHARES which currently provide secure and reasonable capital appreciation. Like its products, Apple’s policies have created a quality share that just works. If you think the stock is undervalued, buy more. If you think you can find a better risk/return (by believing all the Wall Street Bulls**t) then sell your shares and move on.
      5. Apple’s fiduciary responsibility to shareholders is to create share value through operating activities – innovation, good products, good design, good margins, good strategies – not f**king around with the stock manipulations that Wall Street wants and which only benefits brokers on Wall Street.
      6. Apple is proof that a company doesn’t need to pander to Wall Street and in not doing so can be hugely successful- another legacy of Steve Jobs.

      1. I really can’t understand some of your statements:

        ” Wall Street wants a low stock price and variable dividends so they can ‘churn’ the stock (artificially create buying/selling activity because that’s where they suck money out)”

        Perhaps you can explain to me why a non dividend apple stock is harder to manipulate by Wall street than a dividend paying one? . I would think to churn a stock they would need a boom and bust cycle, broadening the investor base of of the stock (which might happen if it is listed in dividend funds and thus be sold to more investors) makes manipulation harder.

        You say “innovation, good products, good design, good margins, good strategies ” is all it needs to do but it’s been doing all that, the Cash pile is growing AND.. the P.E is STILL getting squashed. It’ s totally out of whack with revenue and cash growth. where are the new buyers? what’s your suggestion to get new investors (it’s going to take a LOT to move a massive market cap company like apple up)

        You make my suggestion that they should talk to fund managers like those who run pension plans (some of them have no clue of tech for example i suspect some actually believe android will kill iOs like Mac vs Pc) as a WASTE of TIME and not part of their fiduciary responsibilities : why is that? It IS part of the fiduciary responsibility to take care of their shareholders investments.

        Saying that if investor s are not happy “then sell your shares and move on” is fuckin’ arrogant — like i said before shareholders OWN the company and help start it. Apple wouldn’t exist without shareholders who invested in it . Some big investors have sold chunks of apple shares: maybe that’s why aapl’s P.E is getting more compressed? Lack of faith (even if if wrong) in a companies future is why stocks P.Es get compressed. If people get fed up and sell like you suggest, that’s going to help aapl go up?

        “. Companies issue shares to raise capital. Apple has all the cash it needs. The share price doesn’t affect Apple” You’re suggesting that apple should not care if the stock price goes up or not. WTF is that? If apple ever said that Apple management and board would be faced with freaking big lawsuit. Shareholders own the company THE FIRST RESPONSIBILITY OF APPLE MANAGEMENT (LIKE THE MANAGEMENT OF ALL PUBLIC LISTED COMPANIES) IS TO THE SHAREHOLDER. It was SHAREHOLDERS WHO FIRST INVESTED IN APPLE THAT APPLE EXISTS!!! apple management works for the sharenolder. if apple wasn’t interested in share price and shareholder (and that’s YOUR suggestion not apple’s) then the people who started it shouldn’t have issued shares in the first place and kept apple PRIVATE. do you guys understand that?

        also INCREASING stock price is one way Silicon valley companies keep their best talent motivated, most senior managers are paid with partly with stock . Companies where stock has frozen has not been able to attract top talent but have lost them to others (one of the problems microsoft has suffered), they have to pay big salaries instead to get the engineers etc which uses up the cash.

        Like i said before I’m a big apple fan and i think apple management is tops but I get pissed off when fanatics treat even the most reasoned of arguments with some crazy flames which make no sense.

        1. I have also to add this:

          — the LAST people around that want to HURT apple is the stockholder! we are the ones who had faith who put money in it. Stockholders are the ones who most want apple to grow and prosper. stockholders are the ones who first had faith in Jobs and Wozniaks vision to invest.

  4. I think Apple should do a stock merge. Ten existing shares will equal one new share. Anyone who doesn’t own enough to make one new will either have to purchase the difference or forfeit their stock.

    Also, shareholders will pay a yearly dividend to Apple simply for the honor of owning stock. This will weed out the shiftless fly-by-nighters.

      1. LOL i think he disqualified himself simply on the inability to recognize what he’s referring to is technically called a reverse stock split not a stock merge. Nevermind all the other insane ramblings. Forfeit stock, right.

        😛

        1. Don’t you think this is supposed to be tongue-in-cheek?

          I love the name. Sounds like I’m not a doctor, but I play one on TV. So, I’m telling you you should by this product to cure that ailment that you have, that we won’t mention here to protect your privacy.

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