“Apple’s stock has seen a sharp sell-off in recent weeks, falling by close to 25% from all-time highs seen in October,” Trefis Team and Great Speculations write for Forbes. “The declines have largely been driven by reports that the company is cutting back production orders for the iPhone XS, XS Max, and XR, casting doubt on the uptake of the company’s newest devices. While the concerns are legitimate, considering that the iPhone accounts for about two-thirds of Apple’s revenues, we believe that Apple’s stock remains undervalued at current levels.”
“We expect Apple to see modest iPhone revenue growth in the long run, driven by the ASP increases,” Trefis Team and Great Speculations write. “Apple’s margins could also see some upside in the medium term due to multiple reasons. For one, Apple has been driving significant growth in its high-margin services business… Separately, the company could also see some tailwinds in the near term due to declining semiconductor prices.”
“Overall, Apple looks undervalued at the moment following the stock declines. The company currently trades at a forward P/E of just 13x (under 12x adjusted for net cash) based on our FY’19 EPS projection of $13.70 and the current market price of $177 per share as of Tuesday’s close,” Trefis Team and Great Speculations write. “Apple’s aggressive share repurchases are also another factor that will power EPS growth, with the company spending more than $70 billion in FY’18 on buybacks.”
Read more in the full article here.
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