Apple stock is cheaper than Clorox, says Cowen’s Krish Sankar, who boosts his Apple price target to Street high. Currently, Apple’s stock price is hovering around $500, which is roughly 15% above the average price target among Wall Street analysts.
Sankar on Tuesday morning repeated his Outperform rating on Apple shares, while boosting his price target from $470 to $530, the highest on the Street.
He increased his target for the price/earnings ratio of Apple’s core business — Sankar includes iPhones and hardware in that calculation — to 25 times 2021 calendar year earnings, from 23 times. And for the Services segment, he is now using a target of 41 times earnings, up from 35 times.
That leads to a blended P/E multiple of 31 times his calendar 2021 estimate of $16.83 a share.
Sankar wrote in a research note that “valuation may appear stretched on an absolute basis, but not relative to peers.” He pointed out that the stock has a similar forward P/E to companies like Facebook, Alphabet, and Microsoft. And he noted that electronic-design automation companies, which make software for chip design, trade at higher multiples despite slower revenue growth and lower free-cash-flow yields. Apple’s valuation compares favorably with consumer staples companies, he said, pointing in particular to Clorox, with a similar P/E but projected revenue growth in the low single digits.
MacDailyNews Take: Apple stock is cheaper than Clorox and remains significantly undervalued, even with a world-leading $2.14 trillion market cap.