The debate about what caused Apple (AAPL)’s stock to drop to a six-month low last week continues, but a research note this morning from Topeka Capital analyst Brian White – a noted Apple bull who holds an $1,111 price target on the company shares – calls Apple’s slide of 28% from its September highs “insanely insane” given the valuation at which AAPL is trading.[via BI]”In our view, the sell-off in Apple’s stock over the past eight weeks has gotten to the point of being “insanely insane” given the depressed valuation (CY13 P/E of 7.6x ex-cash), new blockbuster products for the holiday season, the attractive long-term growth opportunities that lie ahead and the Company’s ability to distribute significant cash flow to investors”, White wrote.
According to the analyst, right now is the right time for those investors who may have “missed Apple or been under-weight” to buy shares “before sentiment takes a turn for the positive during what has historically been the strongest quarter of the year for the stock.”
Analyzing further, White argues:
“Trading at a Discount to the S&P 500 Index but Growing Multiples Faster. Apple is now trading at just 7.6x (ex-cash) or a straight P/E of 9.8x our CY13 EPS projection and below the S&P 500 Index at 12.5x. Apple’s discount to the S&P 500 becomes even more of a “head scratcher” when you compare growth rates. For example, between CY03 through CY11, Apple has grown EPS by 92% per year versus just 7% growth for the S&P 500 Index. Essentially, Apple has delivered annual growth that is 13-fold the S&P 500 over the past eight years but trades at a 20% P/E discount (or 40% discount ex-cash). While we don’t expect Apple to grow EPS by 92% per annum over the next five years, we believe 20-30% growth is reasonable based on the Company’s low market share in mobile phones and PCs, combined with growth opportunities in tablets and new potential areas such as Apple TV.”
Apple’s stock rallied Monday after an eight-week slide, gaining $38.00, or 7.10%, to $565.72, a strong move for the world’s most valuable company.