Apple’s press release regarding their results announced yesterday. And unsurprisingly, the stock cannot crack $400 per share even with all the revised analyst estimates and price target upgrades (some of them were tripping over themselves after seeing the results). Which means this gives me time to raise some more cash and accumulate more shares for the next leg up. This has been the wash, rinse, and spin, then repeat cycle for awhile now. Life is good when you know how this crooked market operates.
One analyst, Brian White of Ticonderoga Securities, wrote that Apple’s recent rally has “legs,” thanks to new products. “Looking into the second-half of 2011, we believe Apple enjoys the hottest tech portfolio for the back to school season and holidays.” He gave Apple shares a price target of $666 (heh, the number of the beast).
Here is how one financial blog looks at the stock…
Although its market cap is $360 billion, Apple (Nasdaq: AAPL) may be the most ridiculously cheap company around.
With
sensational earnings power and $76 billion in cash/short/long term
marketable securities, the case that shares are cheap is pretty straight
forward.
If you take the $83 per share in cash
off the current stock price then you have a stock trading at $306/share
and a minimal P/E ratio.
Looking at multiples
based on this ex-cash $306 per share number and you see how attractive
it is based on the current market multiple of 14.91x and 13.4x based on
estimates.
Apple’s multiples based on recently raised estimates, ex-cash:
FY11 (currently in Q4) EPS consensus is $26.78. P/E = 11.4
FY12 EPS consensus is $31.62. P/E = 9.7
FY13 EPS consensus is $37.45. P/E = 8.2
To
drive the point home further, if you consider that for the last 4
quarter Apple has beat estimates by an average of 22% you can see the
that the stock is that much cheaper ex-cash.
Multiples adding in 22% “beat rate”, ex-cash:
FY11 = $32.13. P/E = 9.5
FY12 = $38. P/E = 8.1
FY13 = $45. P/E = 6.8
Since
FY11 is nearly over for Apple, it would be smart to value the company
at least based on FY12 EPS numbers (9.7x for the consensus and 8.1x
factoring in the expected expected beat).
At
9.7x, Apple would be cheaper than all but 49 S&P 500 companies. At
8.1x it would be cheaper than all but 19 S&P 500 companies, or 96%
of all the companies.
So what’s a fair price
for Apple. Take a market multiple on the likely FY12 number and you get
to $509 per share. That is the minimum the stock should be trading at
TODAY.
Unfortunately, AAPL has rarely been valued fairly for the past 20 or so quarters and I personally doubt this will change. But as I mentioned above, gives me time to raise funds and snatch another 100 shares or so below $400 (as anything below that is going to be dirt cheap 2 or 3 years from now). And when Apple continues blowing out the numbers and estimates are raised where the fair value of the stock is raised to $650, AAPL will be struggling to hit that $510 mark. Which means I have time to raise cash to buy more shares below $450 (wash, rinse, repeat).
P.S. – I don’t play options, don’t day trade, or use any form of leveraging now. I like buying and holding shares long term.
