Why Apple stock is oversold

Shares of the personal technology pioneer have lagged behind the Nasdaq, but the stock should get a pop on consumer demand for its newest products.

By TheStreet Staff Nov 19, 2012 12:32PM

Thestreet logoThe iPad mini © Marcio Jose Sanchez/AP PhotoBy  Chris Ciaccia, TheStreet


Apple (AAPL) has wildly underperformed other technology stocks, making the shares a bargain as the company enters the holiday shopping season with a new iPhone, iPad Mini and Mac laptops. 

That's what many Wall Street analysts are saying.


Over the past three months, Apple shares have lost 18.6%, compared with a loss of 7.3% for the technology benchmark Nasdaq ($COMPX). Topeka Capital Markets analyst Brian White believes this drastic under-performance might be over. He called the sell-off in Apple shares "insanely insane," given the valuation at which Apple shares are trading. According to White's calculations, Apple is trading at 7.6 times 2013 earnings, excluding cash.


"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," White wrote in his note. He rates Apple "buy" and has a $1,111 price target on shares, the highest on Wall Street.


There are several theories why Apple shares have plunged -- consumers tiring of Apple products, a lack of innovation, or competition from SamsungGoogle (GOOG), Amazon.com (AMZN) and others. Additionally, there is concern that Apple's incredibly wide profit margins may shrink as the company announces new products and gets squeezed by its suppliers.


Plus, there are factors outside of the technology industry weighing on the stock, including the so-called fiscal cliff, a weak European economy and year-end tax-related selling by shareholders.


Rumors of a Samsung price hike on application processors sold to Apple proved untrue, but that possibility remains and would erode Apple's profits if it were to happen.


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Holiday sales in focus 

Though Apple has had its share of negative press, the company has bright prospects going into the holiday shopping season and into 2013. The iPhone 5 is a hit, having sold 5 million units in its first weekend of availability; the iPad Mini has been well received by reviewers and consumers; and the redesigned iMac, scheduled for release later this month and in December, was the most eye-catching product at Apple's October product launch. 


Topeka Capital Markets' White isn't the only super-bullish analyst on Apple. The average price target on shares is $760, according to data from Thomson Reuters. That's 44% higher than where Apple shares closed on Nov. 16, and it factors in a 30.2% return so far this year. Amazon.com shares are right behind Apple, gaining 30.1% since the beginning of January. Google shares lag, with shares up only 0.2%.


More from TheStreet.com

Nov 19, 2012 4:40PM
I'm always amused when Amazon stock is mentioned in the same article as Apple or Google stocks.  Amazon bled money for a decade and has made little no zero profits for the second decade and yet people still somehow think this is a good investment?? Anyone who follows Warren Buffets style of investment which is based on logic would never touch amazon stock.
Nov 19, 2012 4:29PM
I've never purchased an Apple product and have no intention of doing so in the future. I have no need for overpriced, mediocre products.
Nov 19, 2012 7:30PM
Whoever wrote this doesn't know what the hell they're talking about!!!!  lack of innovation from Samsung, Google and Amazon  !!! 

-Samsung sells more phones including smart phones than apple., 4 times as many

-Google Android trounces all over iOS and has a market share worldwide of 75% whereas apple struggles at just 17%

-Amazon's Kindle Fire has taken a huge chunk out of apple's tablet market share. a year ago, apple had 90% of the tablet market share, today that's down to just over 50%

apple's shares are falling because they're products are boring and are no longer a fashion statement.

Nov 27, 2012 12:32PM
Everyone knows Apple products are ridiculously overpriced. In our current economy less people are willing to pay the inflated prices when there are other superior products out there for less money.That plus recent blunders by Apple (maps and Siri) have made more folks realize Apple products simply aren;t worht the prices they charge.
Nov 27, 2012 11:03AM
it wasn't oversold it was the first warning that the ship has lost its rudder,I was in an att store just yesterday while some came in and bought the iphone ,some commented on the actual phone itself,it compares with years ago the comparison of the iphone 3s to the nokia x3...iphone killed it,now you go in and you look at the iphone 5and compare it to the nokia 920,the galaxy 3 ,galaxy note 2 etc ...once again no comparison then you couple that with failed siri and the maps debacle you will see my point,is there time to right the ship,yes but I don't see that happening in the culture that is now apple,so the selloff was a warning,there will be a few more then the run back up just won't be there that one last time
Nov 19, 2012 4:39PM
Apple makes the best ipods and nanos I love buying their stuff since I like listening to music so much. I got a nano from them it works great! No complaints. I plan on buying me another nano and I hope business goes well for them.
Nov 19, 2012 4:13PM
They replaced Steve Jobs with an uninventive gay.

Don't buy, don't buy.

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