“Much has been written regarding Apple’s (AAPL) valuation, which appears incredibly cheap when you examine the multiples and think about power of Apple’s balance sheet,” Adam Muller writes for Seeking Alpha.
“Apple had over $81 billion of cash on its balance sheet as of its September quarter-end. Apple’s cash balance will likely top $90 billion when the company reports its December quarter on January 24,” Muller writes. “By the end of 2012, if there is no change in policy (i.e. no dividend put in place), Apple will have well over $100 billion in cash.”
“Given Apple’s incredible growth trajectory, it should demand a larger multiple. Even a multiple of 12x fiscal 2012 earnings seems too low, but if applied ex-cash it would imply a stock price in excess of $525/share (12 times $35.15 of earnings plus $105 of cash per share),” Muller writes. “This is a 25% premium to where the stock is trading today. Further, I believe the Wall Street consensus number is conservative.”
“It may be that they are psychological constrained by Apple’s size and cannot bring themselves to think about earnings of $60 per share times a 14 multiple, which implies $840 per share (without adding in cash), and an almost $800 billion market capitalization,” Muller writes. “Will Apple get there? It’s difficult to say, but it’s easy to say that at $420 a share with a multiple less than 10x Apple is cheap.”
Read more in the full article here.