Apple stock is massively undervalued

“Valuation is one of the most important aspects to consider when making investment decisions, and Apple stock looks remarkably attractive from that point of view,” Andrés Cardenal writes for The Motley Fool. “Apple stock is trading at notoriously cheap levels. The company has carried a price-to-earnings ratio of 12.5 times earnings over the last 12 months. When using earnings estimates for the current fiscal year, meaning the 12-month period ending in September 2015, Apple is trading at a P/E ratio near 11.8. By comparison, the average company in the S&P 500 index is trading at a much higher P/E ratio — in the neighborhood of 18.4.”

“The main reason Apple stock is so cheap is arguably because Wall Street is expecting growth to slow down substantially as the smartphone market matures. Apple made nearly 63% of total revenue from the iPhone segment last quarter, and the industry seems to be moving beyond the rapid expansion phase. According to estimates by IDC, worldwide smartphone shipments are expected to grow 10.4% in 2015, a considerable deceleration versus a 27.5% increase in 2014,” Cardenal writes. “On the other hand, it’s important to keep in mind that Apple still has substantial room for market share gains on a global basis. Based on IDC’s calculations, Apple will own just 15.6% of the global smartphone market in 2015, and the company has been stealing market share away from the competition lately.”

“There is a considerable chance the company can do better than expected on the back of sustained iPhone strength and product innovation,” Cardenal writes. “If this happens, Apple stock could deliver huge gains for investors.”

Read more in the full article here.

MacDailyNews Take: Even as it made Apple the world’s most valuable company, the market has never really understood Apple.

13 Comments

  1. I do not believe in conspiracies, especially with respect to AAPL.

    I have come to believe in a double standard though, when WS values a company the size of Apple ($230+ Billion revenue, controls 90+% of industry profits, projected growth of ~20% for FY2016) in the BOTTOM 25% of the S&P 500.

  2. It doesn’t matter what happens. If they fall short on sales, analysts will say that growth is slowing. If they outperform on sales, analysts will say that they will not be a able to sell more next year

  3. Here we go again with more nonsense. The market is up over 200 points and what stock is in the red. It’s not Amazon, it’s not Google, it’s not Netflix and it’s certainly not Microsoft. Of course, it’s the most undervalued stock on the planet… APPLE. Forget fundamentals, revenue or profits. Obviously long-term cash is useless. Yeah, so I guess if you want to compare fundamentals you could say that Apple is undervalued, but that’s not the way it works. Of the whole bunch, Apple has the worst percentage of institutional ownership. Of the whole bunch, Apple is the only company that’s considered by Wall Street as a doomed, one-trick pony.

    I’d only say it’s a massive buying opportunity if you really believe the stock is going to rise. I’d say that’s highly questionable no matter how well the company does in sales. I personally think it won’t rise considerably but I still buy and hold for the dividends and if Apple’s share price actually does rise to the analysts’ median share price targets, I’ll be flush for a long time to come.

    I just happen to think Wall Street likes companies with somewhat sure growth potential. Apple doesn’t seem like an aggressive enough company at this point, at least compared to rivals. Apple should have turned that $140 billion back into the business. One lousy car? Apple could have owned the majority of the U.S. auto industry for $110 billion. Apple keeps thinking too small to satisfy Wall Street’s greed.

    1. Maybe the reasoning is partly that keeping so much cash that could be reinvested in the company is a bad thing. Perhaps Apple can open an investing arm like Intel or Google and make some of that money that sits around to work stimulating other companies.

  4. As investors, we are all aware of the undervaluations of Apple stocks. We do believe that people in Cupertino will have a great solutions to reverse this problem once and for all.

  5. Wonder how many % revenue Toyota, Ford, General Motors earn from sale of vehicles? So wonder why these cheap people talking about Apple’s % revenue from iPhone sales? Do they wants Apple to stop making iPhone? Probably Sam’s agents. Hahahaha

  6. Regardless of whatever people think of AAPL, or any stock, the stock is worth whatever the market is willing to pay for it at that moment, so whether AAPL is “undervalued” or whatever is irrelevant to that extent.

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