Apple stock is a screaming buy for 2013

New investors can pick up shares of the tech giant now without paying a premium for growth.

By Minyanville.com Dec 13, 2012 1:06PM
Angry businessman copyright Imagesource, Corbis

By Oliver Pursche


Apple's (AAPL) stock has been slapped around a bit lately and I couldn't be happier about it.
 
It's a screaming buy. With the most recent swoon, the yield went to 2%, equivalent to the yield of the S&P 500 (INX). While there's a lot more risk in AAPL, as a single stock, it's hard to disagree that the growth potential of AAPL dwarfs the aggregate growth potential of the S&P 500.
 
But that's not the main argument. In my view, the stock is egregiously mispriced.

With a consensus estimate of $49.51 (based on the forecasts of 39 analysts, to September 2013), the forward price to earnings (P/E) of AAPL is 10.96 times the consensus 2013 forecast. That's less than GE (GE). That's less than Wal-Mart (WMT). That's less than Post-it maker 3M (MMM).

 

In short, the way Apple stock is priced right now, current investors are not being rewarded for growth. However, that means new investors can buy the stock without paying a premium for growth.
 
It's interesting to do a bit of an etiology of the current perception suggesting Wal-Mart has more growth ahead of it than AAPL. First, there was the earnings miss reported in July. Then there was the so-called map app fiasco. Then there were the October results that fell short of expectations with a slowdown of iPhone sales and lower-than-expected iPad shipments.
 
I'm not going to parrot the company's remarkable achievements, historic cash hoard, and 2% dividend. What I am going to say is that one of the joys and frustrations of the stock market is the degree to which human emotion plays a role in short-term pricing. Investors overreact to bad news and as a result, stock prices tend to drop disproportionately to the true and ultimate impact of bad news.
 
Certainly an earnings miss followed by lower-than-expected sales in two core products is a cause for concern. But selling off AAPL shares to the point where they reflect a no-growth scenario? Now that's an overreaction!
 
My forecast? I expect AAPL shares to hit $800 in 2013.
 
I might add that if you want securities that move in tune with logic, buy and/or trade bonds. The prime rate and a company's cash flow pretty much set the agenda for pricing. Unless, of course, there's a housing bubble and the rating agencies go verklempt. In that case, all bets are off.
 
When you are a buyer, this is the where they joy comes in (and when you are an owner or a seller, this is where the frustration sets in).
 
The way Apple is priced right now, the stock is not being rewarded for growth.

 

More From Minyanville

15Comments
Dec 13, 2012 3:27PM
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Apple changed the WHOLE music industry over night with iTunes and iPods.  

They changed the smart phone 

 They are going to change the TV industry and on demand programming next.    TV and cable have been suck in the 80's model.  Like Tim cook said it's like going back in time when he turns on his TV.   The idea that you have to buy 100 channels to get 5 that you might watch and maybe only 4 shows you watch is going to be revolutionized next by Apple.

Once the announcement is made next year you'll be sorry you where in at this price.
Dec 14, 2012 2:16PM
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Apple is screaming right now....screaming WTF....THE BLOOD LETTING HAS NOT STOPPED...any person with a low IQ can tell you that consumers are disenchanted with Apple devices...the IPod is only a paper weight at home...I say $250 by end of Q1 2013...plug an apple device to a tv and you have an itv...be realistic guys, apple can best use its capital right now to buy out up and coming infant companies....
Dec 13, 2012 2:34PM
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The thing is Apple has now become a " prove it " stock, i.e. lets see the figures first before we buy and as the current quarters figures are not due out until near the end of January, it cannot really be considered a buy at the moment. I watch the stock every day and in the morning it climbs as people buy it, but buy lunch time, it has dropped again to lower levels, so all those buyers have just lost their money. If you bought Apple when it was around the $200 - $300 mark, then you are still way ahead of the game, but to recommend people buy it now when it is ultra volatile is irresponsible. If this quarter is good, then yes the price will go up, but as we dont know how good this quarter is going to be, and lets be honest here, there have been heavy supply issues with the iphone 5 and ipad mini, which even now are not resolved, so sales of both products could well be below market expectations, therefore, Apple is most certainly not a screaming buy at the moment. 
Dec 14, 2012 9:52PM
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Yes , Wall Street  and their menial media are SCREAMING: "Buy , buy, buy....." And iMorons buy, of course.
But the Balloon makers sell sell sell......
I can bet , that no one izombie sold at 705$ to 550$

Dec 14, 2012 5:54AM
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Keep your biases at the door and just listen.  THIS IS INSANE.  You can say whatever you want about competition ect, BUT at current levels apple is so undervalued it is insane.  I would bank on every buck I have that in 2013 this thing will be sitting around 800ish. After all it is the world most valuable company and it hasn't even reached Googles levels.  If Im wrong I will gladly eat my words.  But honestly, I find it pretty hard to believe that I will be wrong with its numbers.  Think of me in 2013.
Dec 13, 2012 3:26PM
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"The way Apple is priced right now, the stock is not being rewarded for growth."

Wrong, or  paid  brutal lie .
At 450/500$ Apple is more than enough priced, and "rewarded for growth." over the last years.
This 705$ was Wall Street balloon- pyramid. And Wall Street got their profit already. And the zombies are f....d up .
Guess who sold at 705 to 550$ , telling you every day " Stock is down, - time to buy" . LOL

 

Dec 13, 2012 11:28PM
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Apple will continue down.   Apple needs to unify its phone and computer products.   It has discovered that re-inventing TV has do with the way shows are produced and distributed.   Apple won't find many easy pickings as they did when they rolled the music companies.   All of the current media companies are aware of what happened with Apple and the music labels.   Apple has discovered that roku and xbox already have powerful set top boxes.   Apple is a wonderful premium product, but people who want it have it.   Businesses no longer have bring your own devices (BYOD) challenges.   Windows 8 definitively closed the corporate door to Android and Apple.   Apple will slowly drift down to the $300 level.     
Dec 13, 2012 1:20PM
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Their products are stale, chinese labor is more expensive, and IOS hasn't seen an update since 2008. yeah screaming buy.....
Dec 13, 2012 3:11PM
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They peaked at $707 PS before on iPhone 5 hype before Windows 8. They could go back above $600 PS before reality of competition from Android and Windows 8 intensifies but it won't last long.  There's nothing wrong with a 20-30% gain by playing at $528 and waiting to see how Q4 2012 turns out but I wouldn't hold out for $800 in 2013.
Dec 13, 2012 1:15PM
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Stocks is what we should be talking about on these sites instead of MIRAGE BRAIN

and TAXPAYER ! pushing their right wing hate and stupidity.

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