In the United States today, we have more than our share of nattering nabobs of negativism. They have formed their own 4-H club -- the hopeless, hysterical hypochondriacs of history." - Spiro Agnew
Very few stocks have gone from universally loved to universally sold faster than Apple (AAPL) has in the last four months. The latest earnings report contains something for both bulls and bears on the stock. It appears the stock will have another 5% to 7% sell-off tomorrow based on after market trades. However, for long term growth investors the giant of Cupertino is providing a great long term entry point.
Tidbits from Apple's earning report
- The company sold 47.8mm iPhones, right under estimates of 48mm.
- Revenue came in at 54.5B, just below estimates of $54.7B
- Earnings per share of $13.81, compared to consensus of $13.47. This was the first time in three quarters, Apple beat on the bottom line.
- Cash on hand is now up to and incredible $137B.
- It double its iPhone shipments to China.
- Mac shipments came in around 1mm less than estimate (supply problems), if this were not case revenues and earnings would have been much better.
- Gross margin came in at 38.6%, easing worries around this metric with pessimists predicting margins of 37% or under.
4 reasons AAPL is significantly undervalued at under $500 a share:
- More than a quarter of the company's market capitalization is in net cash and marketable securities.
- Although not growing as fast as the immediate past, analysts expect over 20% revenue growth in FY2013 and 15% sales increases in FY2014. The stock sports a minuscule five year projected PEG (.50).
- AAPL is selling at the very bottom of its five year valuation range based on P/E, P/B and P/CF.
- The stock sells for just 7x forward earnings if you subtract net cash and marketable securities. In addition, only a little over 40% of mobile phones sold are smartphones which will provide a tailwind as that percentage continues to move higher.
Disclosure: I am long AAPL.