There’s no shortage of Apple Inc. (NASDAQ:AAPL) pundits in the media, but one of the most widely respected is Jim Cramer, co-founder and chairman of TheStreet, Inc. (NASDAQ:TST), and host of CNBC’s “Mad Money.” Cramer has been a moderate Cupertino bull recently, mentioning last week that he thinks Apple can get to at least $605 a share (see Jim Cramer Loves This Contrarian View of Apple), but there are the obvious macroeconomic headwinds that could derail this forecast at least until 2013.
On the network last night, Cramer was discussing the stock yet again, this time delving into the logic behind the way AAPL should trade for the rest of the year. Here are his thoughts:
“I think Apple’s going down pretty much every day for the simple reason that there are more sellers than buyers – sorry to be so simplistic – but the vast majority of people who own the stock have big capital gains, and those gains will definitely be taxed at a higher rate if there’s no fiscal cliff deal, and they’ll most likely be taxed at a higher rate anyway. So, does it matter how Apple’s quarter is, or if they have new products, or even if the company reports better-than-expected earnings? […] Logic is then stunningly simple. The selling should go on […] it should let up when they can’t get the tax break anymore […] In short, Washington is driving this, not Apple, which is an inexpensive stock – I think it’s fine to own.”
On the whole, we’d echo Cramer’s comments that Apple Inc. (NASDAQ:AAPL) is “inexpensive.” At their current market price in the $546 range, shares trade at a mere 9.2 times forward earnings, and an even 12 times trailing earnings. A PEG of close to 0.6 indicates that investors are massively discounting the stock for its EPS-generating potential, even though bottom line growth has slowed significantly in recent years (backward-looking 5Y EPS GR is 62.2%, forward-looking 5Y EPS GR is 19.6%).
Today, Apple Inc. (NASDAQ:AAPL) has seen a modest uptick in 3+ percentage points, as a bullish iTV report and solid iPhone 5 demand in China have given investors reason to be cheery. As 2012 comes to a close, it’s hard to argue with Cramer’s logic, though, that there might be continued downward pressure on the stock due to profit-taking. After all, with shares still up close to 35% on the year, now’s not a bad time to lock in those gains at a lower tax rate than we’ll likely see when the calendar rolls around.
Let us know your thoughts on Apple in the comments section below. Are you buying the tech giant on the dip now, or are you sitting on the sidelines until January 2nd?