Why Apple’s stock is dramatically undervalued

“There are many contentions why Apple is selling down but none of them are Apple’s valuation,” Darcy Travlos reports for Forbes. ” There is a near consensus that Apple stock is undervalued, if not dramatically undervalued. Here are some possible explanations for Apple’s 27% fall since its high $705 in September.”

“Apple was one of the top stock performers over the twelve months when it hits its high of $705 in September, returning 68% to its investors. It outperformed the Dow, Nasdaq and S&P by over three times. Investors, particularly institutional ones, like to lock in gains under those circumstances,” Travlos writes. “And, as I have written before, Apple, as a top holding in many institutional accounts, often must be sold as it appreciates to stay within a fund’s allocation limits. So, perversely as Apple appreciates, institutions must trim their positions even if they believe it still remains attractive.”

Travlos writes, The selloff at $700 can also be explained by the tax consequences of big stock gains… the looming Fiscal Cliff threatens to tax those gains at 5% to 9% higher than the current rate. So those investors with large capital gains in taxable accounts may have wanted to sell to preserve capital.””

Read more in the full article here.


  1. Noooo…? Really? Undervalued? Dramatically? 🙂

    About a quarter of Apple current value is in pure cash, so (with zero debt) the ongoing business of Apple is being valued “by the market” at less than $400 a share.

    No matter… In the long run, Apple will keep churning out profit quarter after quarter, and add completely new product lines (about every three years) to the current Mac, iPod, iPhone, and iPad.

    2007 – iPhone
    2010 – iPad
    2013 – TV?

    Analysts, popular media, and the general investor population will eventually get a clue.

  2. No other company has been able to do what Apple has done and the public are just starting to get what it means for a company to strive for great user experience BUT the institutional stock buyers just can’t believe that a company can do so well and they conclude that it must be false so they are pulling their money out. A large telecom company in China rejected the deal Apple offered for a flagship smart phone and the institutional buyers became sellers. The retail public (investors) saw the stock falling and saw a few moving average indicators crossed and pulled out too. Now everyone is waiting to see when ‘the other guy’ is going to start buying again.

    Elliott wave analysis shows that we just finished a 4 wave sell and are rolling into a 5 wave buy. This may be enough to trigger a spree towards $600 and then MAYBE break through to $700 again by March perhaps. As always, this is just analysis and has nothing to do with reality.

  3. It was probably overvalued at $706. It’s probably undervalued at $509. But “valued” is seldom reality. So many things are factored in a share price. Some of those things (taxes) will go away after January 1. Some will go away when the fiscal cliff is settled (at least for now). Some will be addressed at earnings in late January for the 1st quarter. AAPL will definitely rise (in my humble opinion) once the tax and fiscal cliff issues are behind us. Earnings are not a slam dunk but I’m guessing AAPL will do well if not great. Certainly could be wrong there. Earnings are always interesting for all companies. Not just AAPL. If you invest and follow companies you know that. P/E,margins,revenue number of outstanding shares are important in the “value” of an equity. But they are only part of the picture. Taxes,sentiment,legal problems,condition of the overall economy,world events and many other things affect the “valuation” of a company’s share price. It’s generally the overall picture rather than “manipulation” or “they’re picking on my stock” that gives you the current share price. And it won’t be “manipulation” that makes AAPL rise, as I believe it’s about to do, either. Things look good.

  4. I don’t need to know the reason why the stock is undervalued. I only want the stock to be valued like many of its peers are or at least in line with the S&P 500. All I hear is excuses and reasons but I don’t see anything changing for the better. I would like to hear a valid reason as to why Apple’s share price is so far below Google’s and why Google has a P/E of 21 and Apple’s is 11. Then again, maybe not. I’m sure it would only piss me off more. It’s bad enough that Apple’s P/E is below Microsoft’s. I still say that if a company is a successful company and making high profits and it can’t earn investors’ confidence or give decent returns to shareholders, then there’s no point in building a successful company. Might as well just load it up with debt and blow all the reserve cash on useless crap.

    Also, Apple’s P/E should not be constantly dropping the way it is considering multiple highly successful products in the last few years. And I damn sure don’t want to hear some BS about “Wall Street just doesn’t get Apple” unless idiots are running the whole stock market farce. Even when Steve Jobs was alive the P/E was dropping so they can’t say some BS about Steve’s death causing it.

    1. The best theory i have come up with is either it is easy to bring Apple down and/or it is that Apple is an industry threat to basically everyone. They have the resources do damage in basically any sector. A new process invented? Let’s bet $20 billion on this. It will give us a strategic
      advantage, and we can pull the string and see where this takes us. Nobody is safe. Or people really are dumb. Or it’s a combination of the two.

  5. Apple’s P/E is low because their competitors have caught up with them by making inferior and cheaper gadgets and then marketing them to people who don’t care about quality. Apple is in the wrong business. It ought to be making serious computers for the unlimited corporate and government markets. Markets that Steve Jobs decided to abandon. Now you see what that brought about. Unbelievable, soaring profits on the best gadgets for as long as it lasted. Now, it’s over and Wall Street sees Apple with its best days behind them. The stock will not reach 700 again. The blunder of the strategy to make the best phones, pods, and pads worked for a little while but now its over. Analysts keep trying to justify their optimism on fundamentals of Apple’s still strong sales, profits, and their unheard of cash horde. Investors don’t care. Apple is now Sony.

    1. The “unlimited corporate and government markets” are quite limited in ways. You can’t earn as much profit on hardware sales, so you have to make it up in services and enterprise software licensing. IBM and Microsoft have made a pretty good living doing that so far. But companies and governments have been pushing back via open source software, cloud apps, delayed refresh cycles, and insourcing rather than outsourcing. How long can Microsoft keep milking Windows, Exchange, and Office? My guess is that Microsoft has been on the downslope for several years, already.

      Besides, while Apple is a great company, it does not do everything well. Based on its history, Apple does not do a good job supporting the enterprise – limited enterprise software, too much evolution/not enough stability, unwillingness to toe the line in terms of government and corporate mandates for software/security design.

      In my opinion, your idea of having Apple focus on the enterprise is a highly flawed concept.

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