Topeka’s Brian White—who has been super-bullish on Apple—bangs the drum again this morning, saying that Apple’s selloff of nearly 25% from its recent highs has been “insanely insane.”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. Those investors that have missed Apple or have been under-weight the stock, now have another opportunity to buy Apple before sentiment takes a turn for the positive during what has historically been the strongest quarter of the year for the stock.
Diving further into the aluation, he 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.
For more on what’s happening this morning, see 10 Things You Need To Know Before The Opening Bell >
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