Apple stock, the deal of the decade?

“Owning Apple right now can be frustrating to investors. The company’s fundamentals are intact but the stock ($561) is trading at 8.2x FY13 EPS ($53.88). Even analysts predict the company will earn more than they thought three weeks ago with earnings estimates increasing. Investors need to keep the course, and take these opportunities to buy Apple on these sell offs,” Darcy Travlos writes for Forbes.

“Investors are being offered an opportunity in the market to purchase a stock at 8.2x earnings (excluding cash) for a company that is growing 59% year-over-year in the last quarter,” Travlos writes. “This attractive stock price is the explanation for its recent run. Despite the stock price appreciation, the stock price has still not caught up with the value of this company. According to a FactSet report published this week, the forward PE of the S&P 500 is 12.7x. Apple’s is 8.2x. This means that Apple, one of the fastest growing large-capitalization companies with an arguably terrific line-up of products, is trading at a 50% discount to the overall market.”

Travlos writes, “The Apple story remains intact. Outstanding products. Limited competition. Outsized margins. Consistently high growth. Continued innovation. Enormous cash cushion. Stellar management and execution… Undoubtedly, there will come a time that Apple itself will be disrupted, but it does not appear to be anytime soon.”

Read more in the full article here.

14 Comments

  1. The answer is simple. Investors, especially in tech stocks, are always, always looking ahead. With Apple Inc. they are trying to see through the fog of post-Jobs era. Right now they are getting a glimpse of trouble. Uncertainty that new product launches for the rest of the year, and maybe from now on, will not be wow just wow, magical, or remarkable in any way. They will be simply next generational, ordinary, and not very different from any one else’s gadgets and gizmos. WWDC will be lack-luster everywhere except on these boards where MDN and their lemmings will continue to swoon and look silly doing so. Okay, now flame away, call me out as a troll, etc., but iCal this and we’ll see. You’re welcome.

    1. Where is the trouble? Record profits, the best products on the market, best in service in the world. The biggest cash cushion in the world. The most innovative products in the world. WWDC sold out in 2 hours! We will iCal this and you will be the troll eating your typed words. There is nothing in what Apple is doing today that shows any down turn now or in the future. You under estimate Tim Cook and the management team that Jobs created and has been in place for many years already. I see no logic to your post or what you believe. Tell us where the uncertainty is? I would like to know where you see this?

      1. If you haven’t figured it out yet – Tim is a really good guy but he’s completely uninspiring, even using Steve’s famous words about upcoming, exciting products, he’s just dull and leaves the audience disappointed. Look for tweaks at WWDC, nothing sensational, nothing the way it used to be. Next year, another sell out but not as quickly. After that, available seats day of.

    2. Sure, Pete, let’s pretend Apple’s growth immediately drops from its five year average of 75% per year to ZERO. Guess what? In five years, Apple will have added $260 billion to its balance sheet FROM CASH FLOW ALONE and the company’s market cap will have to be adjusted accordingly.

      Got that? ZERO growth for Apple means its market cap will be $260 billion higher in five years. Do you know any company whose growth has suddenly declined from 75% to zero? Do you really expect that to happen to Apple?

      http://aaplpain.com/?p=2086

      Sheesh…

  2. Or it could be those with the money, playing the small investor to make even more money. When the stock runs up or down by 50 – 100 dollars, do you know how much money they make buying and selling 200,000 shares??? MILLIONS.

    Just a thought,

  3. AAPL will always be undervalued that will never change but now we are getting to the point where the PE can’t be compressed anymore so future growth will be met with the appropriate stock appreciation.

    1. Apple’s P/E can always be compressed further in the same manner as Amazon’s P/E can always be expanded further. There are no high or low limits for Wall Street and the crooks that run it. You’re only fooling yourself if you feel otherwise. Wall Street can hold down Apple’s share price long enough for it to stumble for any reason and those lofty target prices will never be met.

      Wall Street is slowly trying to bring down Apple’s P/E to around where Cisco’s is and they’ll likely succeed by the end of this quarter. If there were any set rules of valuation, then Apple’s share price wouldn’t be sitting as low as it is already. Apple is cheap because it’s not considered valuable enough to investors.

      1. All Apple needs to do to combat this is keep sustainably increasing their dividend. That will automatically put an increasing floor on the shares. Apple will not be able to be pushed down low enough for the dividend to be too juicy because buyers will automatically pile in before those levels are reached.

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