“Over the past year, Apple (AAPL) has made a complete transformation in the way it is perceived by investors. Specifically, the stock has gone from a growth play to a value play, and has taken investors on quite a roller coaster ride as the transition has unfolded,” Matthew Frankel writes for Seeking Alpha. “Still, a lurking question on the minds of a lot of investors is whether or not Apple will reach the $700+ level that it saw so briefly last September, and if so, when could this happen?”
“For the sake of this discussion, I’m going to assume that Apple is no longer a growth company and will most likely never see the extreme growth rates of the last decade again,” Frankel writes. “What does this mean for valuation of the stock? It means that the current valuation level is here to stay, give or take a little, and that a TTM P/E of 12.5 is probably close to what we can expect. If Apple releases a truly game-changing product, it could increase significantly, but I feel confident in saying that P/E multiples of 25 (like last September) are a thing of the past, regardless of how good Apple’s future products are.”
Frankel writes, “But wait, isn’t 12.5 a little low, even for a value play? Yes, but I also believe that Apple warrants a considerable discount simply due to its size.”
Much more in the full article here.