Apple: Mixed Report Gives Bulls Some Long-Term Hope

| About: Apple Inc. (AAPL)

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 (NASDAQ: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:

  1. More than a quarter of the company's market capitalization is in net cash and marketable securities.
  2. 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).
  3. AAPL is selling at the very bottom of its five year valuation range based on P/E, P/B and P/CF.
  4. 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. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.