The truth is that Apple’s share price is so sharply discounted because of the lack of investors willing to invest in Apple. The market is often driven by news and emotions rather than fundamental analysis. The irrational fear surrounding Apple’s future prospects has led to an overreaction in the share price. Apple Inc. (NASDAQ:AAPL) has an enterprise value of about $250 billion and generates over $30 billion in cash a year and because of this there is not really much room for Apple to drop further. Apple has reached close to its price floor as it is hard to see it dropping any further.
I believe one should not just buy a company because it is cheaply valued. Beyond its cheap valuation Apple’s true value comes from potential future windfalls. While it is still in the works, any potential iPhone deal with China Mobile could provide a subscriber base of 700 million people and help Apple truly penetrate the Chinese market. Venturing into the world of science fiction, the iWatch could be the innovative change that people have been waiting for. It is a product that could revolutionize technology much like the iPhone and iPad revolutionized the smart phone and tablet industry. Apple’s valuation provides the safety net in case it takes time for everything to pan out.
The article Is Apple Trading at an Unreasonably Discounted Price? originally appeared on Fool.com and is written by Xuebing Wang.
Xuebing Wang has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Xuebing is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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