Is It Safe To Buy Apple Inc. (AAPL) Again?

Page 1 of 2

For two months, from mid-September to mid-November, Apple Inc. (NASDAQ:AAPL) dropped from $700 to about $525 per share- a correction of 25%. The stock was still well up from its levels at the beginning of the year- in early January it was trading a bit above $400- but market watchers feared that the stock would continue down. However, we’ve since seen a rally of about 10% as we close in on the end of the year.

Ken Fisher - FISHER ASSET MANAGEMENT

Apple Inc. (NASDAQ:AAPL) had been the most popular stock among the hedge funds and other notable investors tracked in our database of 13F filings for the third quarter of 2012 (see the full rankings), even after the fall in its stock price had begun. Billionaire Ken Fisher’s Fisher Asset Management had streamed into the stock, increasing its holdings by a factor of more than 10 to a total of about 960,000 shares. This made it one of the ten largest positions by market value in Fisher’s portfolio (find more of Fisher’s favorite stocks). Third Point, managed by billionaire Dan Loeb, also added shares and increased its stake to 710,000 shares (check out more stock picks from Dan Loeb).

Apple Inc. (NASDAQ:AAPL)’s fiscal year ended at the end of September, with the company’s 10-K reporting strong growth over the previous fiscal year. Revenue was up 45%, and net income came in 61% higher; earnings were almost triple what they had been in the fiscal year ending in September 2010. Apple also finished the year with a hoard of cash, cash equivalents, and marketable securities totaling $121 billion (mostly in long term marketable securities).

The stock currently trades at 13 times trailing earnings. A multiple in that range generally indicates that the market does not expect much growth in a company’s earnings, so even if Apple Inc. (NASDAQ:AAPL)’s growth rate slows dramatically it would likely be undervalued at these levels. Wall Street analyst estimates place the stock at a forward P/E of 10 and a five-year PEG ratio of 0.6, demonstrating that it certainly has room for a substantial rise in price if it can hit earnings targets. We wouldn’t bet on the company beating earnings, but as we’ve discussed the market seems to be pricing the stock at experiencing little if any growth. If we treat long term marketable securities as cash equivalents and subtract them from Apple’s enterprise value, the EV/EBITDA multiple comes in at 7.3x.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!