After pullback, even 'value' investors should eye Apple stock - report

Posted:
in AAPL Investors edited January 2014
Concerns about the health of Apple Chief Executive Steve Jobs have caused the company's stock to take a hit, even as it reported record earnings last week. The news has left Apple's stock vastly undervalued, according to one Wall Street analyst, who has a price target of $550.



Analyst Brian White with Ticonderoga Securities issued a note to investors on Monday noted that it's a good time to look at AAPL stock, given the pullback in shares last week after the announcement last week that Jobs would take a medical leave of absence. Even without Jobs, White sees Apple's stock rocketing to a new high of $550 in the next 12 months, based on a strong product lineup and growing sales.



"Jobs's medical leave of absence... overshadowed a big December quarter print and March quarter outlook," White wrote. "Although there could be further selling pressure, we believe the risk-reward is becoming so favorable that even value investors should begin buying the stock."



The analyst said he believes Jobs has been building a strong team that will be able to successfully lead Apple into the future. He also believes that were it not for concerns about Jobs' health over the last few years, AAPL stock would never be trading at "such a discount."



"With Apple's hot product portfolio, we expect the company to continue outperforming the tech sector over the next several years," he said.







For fiscal year 2011, Ticonderoga Securities is projecting 56 percent revenue growth and 54 percent earnings per share growth. That growth will be driven by the new CDMA iPhone 4, set to debut on the Verizon network in the U.S. on Feb. 10, followed by anticipated launches of the iPad 2, new MacBook Pros, and the iPhone 5.



In particular, White sees strong sales of the iPhone and iPad driving the much documented "halo effect" that drives new consumers to the Mac platform. White said the Mac appears to be going through a "renaissance," and he expects that performance to only improve in the coming years. He sees Apple selling 16.7 million Macs and 27.4 million iPads in fiscal year 2011.



Ticonderoga Securities' $550 price target is based on an earnings per share estimate plus net cash per share of $63.98. White's numbers equate to a straight price-to-earnings ratio of 22x, which is below the 26x multiple AAPL stock has seen over the last six years.
«134

Comments

  • Reply 1 of 76
    try WOZ
  • Reply 2 of 76
    I'd like to think he's right, but the numbers don't reflect current realities. He's looking for AAPL to appreciate faster than their EPS (67% vs. 54%). The truth is, over the last several years, the opposite has occurred. Why he thinks multiples will actually increase at this stage is hard to figure.
  • Reply 3 of 76
    Quote:
    Originally Posted by Dr Millmoss View Post


    I'd like to think he's right, but the numbers don't reflect current realities. He's looking for AAPL to appreciate faster than their EPS (67% vs. 54%). The truth is, over the last several years, the opposite has occurred. Why he thinks multiples will actually increase at this stage is hard to figure.



    If you don't already, read Asymco - http://www.asymco.com/



    Today talking about a hypothetical about acquiring Apple due to its vast undervaluation in terms of trailing earnings. Its not serious about a takeover or going private but does interesting analysis of APPL and its very low valuation vs. comps and outlook.



    If you'd taken Apple private 2 years ago, you'd have paid off most (80%) of the debt incurred by now. Today you could do it in 4yrs at current trends. With the lack of a cap on Apple's growth in all product lines (tiny market share today, massive growth in emerging and new APPL markets, brand, satisfaction rates, strategy, etc.) there is little real reason to doubt it would be plausible (if highly improbable).



    Anyway - main point - Asymco is brilliant (and filled with some of the best commenters on the Web) - Don't ruin it, y'all ;-)
  • Reply 4 of 76
    Quote:
    Originally Posted by EyeNsteinNo View Post


    try WOZ



    I think Woz is visionary in a different way -- he looks for things he wants to do/have.



    Jobs looks for things he wants that are what others will buy!



    I think this goes back to the garage days -- Woz built a computer for the challenge and to have a computer of his own -- Jobs wanted a computer to sell.
  • Reply 5 of 76
    mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by Dr Millmoss View Post


    I'd like to think he's right, but the numbers don't reflect current realities. He's looking for AAPL to appreciate faster than their EPS (67% vs. 54%). The truth is, over the last several years, the opposite has occurred. Why he thinks multiples will actually increase at this stage is hard to figure.



    Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.
  • Reply 6 of 76
    Quote:
    Originally Posted by EyeNsteinNo View Post


    try WOZ



    I love WOZ. But he is not the same kind of visionary.



    Quote:
    Originally Posted by Capnbob View Post


    If you don't already, read Asymco - http://www.asymco.com/



    Could not recommend more.



    Quote:
    Originally Posted by mstone View Post


    Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.



    Why do you suppose? For now it will continue due to additional iPhone penetration and the iPad's potential is hard to even imagine. They may also do something else in years to come which opens them up to whole new worlds of possibility.
  • Reply 7 of 76
    Stock price predictions are intuitive hype and their sole point is to generate ad views.
  • Reply 8 of 76
    mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by Xian Zhu Xuande View Post


    Why do you suppose? For now it will continue due to additional iPhone penetration and the iPad's potential is hard to even imagine. They may also do something else in years to come which opens them up to whole new worlds of possibility.



    Do you really think the stock will triple again in 3 years? $1000 in 2013? I would not be surprised if they are trading in this same range then. $3-4 hundred.
  • Reply 9 of 76
    Quote:
    Originally Posted by mstone View Post


    Do you really think the stock will triple again in 3 years? $1000 in 2013? I would not be surprised if they are trading in this same range then. $3-4 hundred.



    I didn't say that... why would you even assume I meant such a thing?



    Predicting that they will trade in the $300-400 range in 2013, however, assumes that they will remain a nervous price-to-earnings ratio and that they will not continue to grow in some noteworthy way (or some combination of these two things), which is highly unlikely. Even if Apple stops innovating at the level they have through recent years they've still got incredible growth potential in the iPad and plenty more to gain in the iPhone (as smartphones become more and more common place). I'm not sure how you can even qualify that vision.



    Or that fat dividends are going to come into play through future years, but I don't see that happening either. It doesn't exactly go hand-in-hand with a company focused on growth.
  • Reply 10 of 76
    realisticrealistic Posts: 1,144member
    Quote:
    Originally Posted by mstone View Post


    Do you really think the stock will triple again in 3 years? $1000 in 2013? I would not be surprised if they are trading in this same range then. $3-4 hundred.



    If they add 7-10 billion a quarter to their cash on hand, like they just did, yes I do see a $1000 stock in 3 to 4 years allowing adjustments for stock splt(s) if any.
  • Reply 11 of 76
    mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by Xian Zhu Xuande View Post


    I didn't say that... why would you even assume I meant such a thing?



    Predicting that they will trade in the $300-400 range in 2013,



    Didn't say you said anything. Didn't predict anything.
  • Reply 12 of 76
    Quote:
    Originally Posted by EyeNsteinNo View Post


    try WOZ



    Woz is great, but there would be no Apple if it weren't for Jobs.
  • Reply 13 of 76
    doxxicdoxxic Posts: 100member
    Apple may not be growing so much in W-Europe and the US, but that's only a small part of the world.



    Correct me if I'm wrong but as far as I can see, not one competitor has the vast opportunities in China that Apple has. Google's business model based on ads and consumer data is impossible over there.
  • Reply 14 of 76
    Quote:
    Originally Posted by mstone View Post


    Didn't say you said anything. Didn't predict anything.



    Your response to me:



    Quote:
    Originally Posted by mstone View Post


    Do you really think the stock will triple again in 3 years? $1000 in 2013?



    You can probably expect, and rationally so, that when you throw out something relatively specific like this in response to a quote from another forum member that they are going to assume some kind of association exists.
  • Reply 15 of 76
    What a stupid thing to say. At a PE of more than 20x Apple needs to keep growing to justify the current pricing. They are a growth stock, not a value stock, even if you believe they will manage to keep growing.
  • Reply 16 of 76
    Quote:
    Originally Posted by Capnbob View Post


    If you don't already, read Asymco - http://www.asymco.com/



    Today talking about a hypothetical about acquiring Apple due to its vast undervaluation in terms of trailing earnings. Its not serious about a takeover or going private but does interesting analysis of APPL and its very low valuation vs. comps and outlook.



    If you'd taken Apple private 2 years ago, you'd have paid off most (80%) of the debt incurred by now. Today you could do it in 4yrs at current trends. With the lack of a cap on Apple's growth in all product lines (tiny market share today, massive growth in emerging and new APPL markets, brand, satisfaction rates, strategy, etc.) there is little real reason to doubt it would be plausible (if highly improbable).



    Anyway - main point - Asymco is brilliant (and filled with some of the best commenters on the Web) - Don't ruin it, y'all ;-)



    Somebody posted a link to this site a few days ago. Good stuff. Maybe it was you? They were also the ones who came up with the PE compression analysis, which I thought was very interesting if also a little depressing.



    Quote:
    Originally Posted by mstone View Post


    Apple growth has been rather unusual in that large companies generally hit a plateau and become investment stocks instead of growth stocks. The iPhone turned them into a growth company almost overnight, but that is going to level out pretty soon I would imagine.



    At some point a company will turn into a value as opposed to a growth story. This is true -- but Apple has defied the usual pattern by keeping up the growth picture even as they've become huge. But the markets have been anticipating the winding down of the growth story for several years now, even in the face of continued astonishing earnings growth. So what you get is a company that must grow earnings by 70% to get stock appreciation of 50%, or in another words, compression of multiples. This leads me to wonder what will happen when earnings growth rates actually do come down to earth, which is bound to occur eventually.



    Anyway, this analyst seems to think the opposite trend is at work. It's not clear to me how he gets there.
  • Reply 17 of 76
    Quote:
    Originally Posted by Capnbob View Post


    If you don't already, read Asymco - http://www.asymco.com/



    Today talking about a hypothetical about acquiring Apple due to its vast undervaluation in terms of trailing earnings. Its not serious about a takeover or going private but does interesting analysis of APPL and its very low valuation vs. comps and outlook.



    If you'd taken Apple private 2 years ago, you'd have paid off most (80%) of the debt incurred by now. Today you could do it in 4yrs at current trends. With the lack of a cap on Apple's growth in all product lines (tiny market share today, massive growth in emerging and new APPL markets, brand, satisfaction rates, strategy, etc.) there is little real reason to doubt it would be plausible (if highly improbable).



    Anyway - main point - Asymco is brilliant (and filled with some of the best commenters on the Web) - Don't ruin it, y'all ;-)



    NICE info! Its a great time to buy!
  • Reply 18 of 76
    vinney57vinney57 Posts: 1,162member
    The traditional/institutional investor surely still sees Apple as being unduly under the influence of one man. While the future of that person is uncertain, the future of the company is uncertain. So while performance is stellar (and has been for 19 quarters?) there is still some discounting of future growth and the resultant P/E compression.



    Now, as Followers of the Fruit we know that person will eventually be succeeded - however we also know that Apple has some key personnel in place who are fully imbued with the Wisdom of Jobs and that its unlikely there will be any strategy or focus shifts in the years to come (of course at Apple that actually means total focus shift every five years or so - that's what Apple is so good at). Investors will surely begin to realise that the changing of the guard will not cause the earth to stop rotating and that the largest company on it still has tremendous upside potential.
  • Reply 19 of 76
    blastdoorblastdoor Posts: 1,945member
    As reflected in the comments here, a lot of people have a very hard time wrapping their brains around a company as big as Apple growing as fast as Apple. That's just not supposed to happen. Thus Apple is consistently undervalued. The upside is that Apple is a buying opportunity.



    I interpreted the Asymco article about Apple being a buy-out opportunity as a tongue-in-cheek way to make an argument that the stock is undervalued. Obviously nobody is going to acquire Apple because it is far too big, but the article makes some good points about the degree to which Apple is undervalued.
  • Reply 20 of 76
    mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by Xian Zhu Xuande View Post


    Your response to me:





    You can probably expect, and rationally so, that when you throw out something relatively specific like this in response to a quote from another forum member that they are going to assume some kind of association exists.



    Understood. I said that the growth should start to level off, you indicated that no, it would continue to grow, I assumed you meant at the current rate, thus the question, $1000?



    Just a simple question no argument.
Sign In or Register to comment.