After Apple (AAPL, news) blew away earnings estimates on Jan. 25, Wall Street analysts rushed to push up their price targets for the stock. After all, consensus earnings estimates were $10.07 a share for the quarter ending in December, and Apple delivered $13.87 a share in profits. FBR Capital put in a one-year target of $525. Morgan Stanley said $515. Citigroup went wild and said $600 a share.

How quaint.

The stock, which closed at $446.66 before the company announced earnings, hit $509.46 a share on Feb. 14. It pegged a high of $526.29 the next day. And despite some amazing volatility recently, shares closed at $516.39 on Feb. 23.

Wall Street analysts rushed back to their models. $570 a share, said Oppenheimer. Credit Suisse upped that to $600. Morgan Keegan and Canaccord went to $650. Searching on Feb. 22, I found a price target on Seeking Alpha of $790 a share.

It's enough to remind you of the heady days just before the dot-com crash in 2000 when analysts raced to see who could get 15 minutes of Internet fame by topping the audaciously higher target price of yesterday with one even more outrageous today. In October 1998 it was Amazon.com (AMZN, news) to $400. By December 1999 it was Qualcomm (QCOM, news) to $1,000.

We all know how that worked out. The technology-laden Nasdaq Composite Index ($COMPX) hit its all-time closing high of 5,048.62 on March 10, 2000 -- and then fell off a cliff. By May 2007, it had clawed halfway back to its 2000 high. On Feb. 23, the index closed at 2,956.98.

Investors who remember the technology crash of the Nasdaq fear that if they buy Apple now they're jumping in just before the plunge. And even more frightening, some investors who remember the 2000 crash also think of Apple as company built on fashion. They worry not only about a replay of 2000 but what happens when Apple misses the next fashion trend.

Image: Jim Jubak

Jim Jubak

To these investors I'd say, "Hey, it is different this time." Apple's stock is cheap right now. You heard me, cheap -- because of these very worries. I think $600 a share is a very conservative target price for Apple. I think you have to go out to $650 before you come up with any barriers that might limit the stock -- and even then, the barriers are mostly in investors' heads.

Why Apple is cheap now

Apple sports the biggest market cap of any company in the world -- $478 billion. But it trades at just 12.1 times projected fiscal 2012 earnings per share. (Apple's fiscal year ends in September.) Take away net cash of $100 billion (yes, that's billion) and the stock is even cheaper. Sales grew by 66% in fiscal 2011 and Standard & Poor's forecasts 48% sales growth in fiscal 2012. Gross margins are climbing. Standard & Poor's forecasts that 2012 gross margins will climb in fiscal 2012 from Apple's 40% in fiscal 2011. This isn't a stock trading at 100 times revenue and on the distant promise of earnings.

Here you've got a company that has grown earnings per share by 82.7% in fiscal 2011, by 66.9% in fiscal 2010, and by 69.4% in fiscal 2009 -- and it trades at a trailing 12-month price-to-earnings ratio of 14.6? The price to earnings/growth rate ratio for this stock on the projected five-year earnings grow rate is just 0.62. (The PEG ratio divides the PE ratio by the earnings growth rate to give an investor an idea of how cheap of expensive a company's growth is.)

Do you know what kind of companies have trailing 12-month PE ratios like that? Solid but stolid blue chips like 3M (MMM, news), at 14.72, or electric utilities like American Electric Power (AEP, news), at 12.77. And you know what the PEG ratios on projected five-year earnings growth are for these stocks? For 3M it's 1.38 -- growth at this stock costs more than twice as much as at Apple. The PEG ratio for American Electric Power is 3.37.

If there's an expensive stock in this bunch, it's not Apple but that solid utility stock.

And to investors I'd say that despite all the hype around Apple, I think it is one of the least-understood stocks on the market. Apple isn't a gadget company at the whim of fashion. It has built at least two major competitive advantages, and it keeps investing heavily in each. And it looks like each advantage is just getting stronger. I don't see anyone out there ready to eat away at them.

Apple's 2 major edges

First, Apple has built an extraordinary hardware/software ecosystem that yields products that better integrate hardware and software. That gives the company a way to introduce products that are in many ways presold to consumers.

Apple designs and controls the production of its own hardware and software. That control may rankle companies that work with Apple. But it means that the company's app store is cleaner and easier to navigate than the Android store, that its products are easier to set up out of the box than the conglomeration that is a Microsoft/Intel/Hewlett-Packard PC, and that its products -- to an imperfect but still extraordinary degree -- work with each other.

To really, really compete on this level Google (GOOG, news) would have to not just buy Motorola Mobility (MMI, news) -- for $12.5 billion -- but also find a way to finesse its relationships with all the companies that produce their own flavors of Android phones.

Importantly for investors, Apple understands its advantage here and is building on it. Take the new iCloud product. Are consumers really prepared to differentiate the quality of one cloud-based service from another? Not really -- short of a service producing massive outages or data losses. But they do know how easy it is to access cloud-based storage, upload and download, and how easy it is to use the service from any of their multiple devices. I can get iCloud with my iPad and iPhone? Sure, I'll try it. And once the consumer has tried it, every use makes changing a bigger hassle.

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