Aswath Damodaran, a Finance Professor at Stern School of Business at NYU, has said in a piece on his financial blog that Apple Inc. (NASDAQ:AAPL)’s fair value is $96.55 per share. The current market price of Apple Inc. (NASDAQ:AAPL) is $96.87 per share, slightly above his estimate.
The professor, which tracks other tech companies as well, is using a value investing approach in his analysis and is providing quarterly stock-price estimates by looking into earnings reports. Regarding Apple Inc. (NASDAQ:AAPL), Mr. Damodaran considers the company has reached maturity and is in fact a cash-cow with the iPhone and iPad products bringing most of the profits.
“Starting in 2011, my narrative for Apple has been that it is a mature company, with limited growth potential (revenue growth rates < 5%) and sustained profitability, albeit with downward pressure on margins, as its core businesses becomes more competitive. I allowed for only a small probability that the company would introduce another disruptive product to follow up its trifecta from the prior decade (the iPod, the iPhone and the iPad), partly because of its large market cap and partly because I thought it had used up its disruption karma over recent years,” said Damodaran
Apple Inc. (NASDAQ:AAPL) is now entering a phase of stability, as investors seem to behave more calmly before and after the earnings call and price the stock adequately. Gone are the times when at every report, there were expectations for Apple Inc. (NASDAQ:AAPL) to announce a game changing product.
“[…] The company is being measured for what it really is: an extraordinarily profitable company, with the most valuable franchise in the world,” adds Mr. Damodaran.
Given that the stock trades now in the range of what seems to be fair value, the stock is a “Hold.” However, if it goes north of $100 it may be wise to sell the shares, suggests professor Damodaran.