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Summary

  • Apple has rocketed up more than 50% from its lows in the last year as sentiment on the shares has grown increasingly positive.
  • Even with its recent rise Apple is not expensive compared to the overall market.
  • The company has several catalysts that could trigger further gains and the stock still seems poised to outperform.

Apple (NASDAQ:AAPL) came within a whisker of hitting $650 a share in intraday trading this morning. It is the first time the company has achieved this level since early in the fourth quarter of 2012. My regular readers should not be surprised by how well Apple has performed in 2014. On the last day of 2013, I predicted the shares would hit $650 a share in 2014. However, I am a bit surprised how early in the year this has been basically achieved. It is nice to be early in a good way for a change.

So now that the shares have hit $650 a share, now what? I am going to be very honest in my assessment of the current value I see right here on Apple. First, it should be noted that the shares are not the screaming buy they were early last summer. Back then, as my regular readers know, I was pounding the table on this severely undervalued stock as sentiment was just way too dismal and had nowhere to go but up. At one point the shares constituted some 10% of my overall portfolio.

In those days "Apple has lost its mojo" stories were as prevalent as guys over 6'6'' in the NBA. Now some of the same pundits are calling Apple a great value story after it has gained more than 50% from the under $400 a share level it sold at in late June.

That being said, there is still some considerable value left on Apple for longer term investors even at this level. Even after buying more than $40B back in its stock over the past two and initiating two dividend hikes, the company still has some ~$150 in net cash & marketable securities on its balance sheet and recently raised its stock buyback program by $30B.

The stock currently goes for 14.5 forward earnings, a discount to the overall market multiple of 16 to 17. The company should see revenue growth of 6% to 7% year-over-year which contrasts favorably to the 4% sales growth expected from the S&P 500 in 2014. Backing out net cash and the shares sell for an even deeper discount to the market going for under 11 times forward earnings.

In addition, the shares pay a dividend yield of 2.1%. The launch date for the iPhone 6 that should have larger screens that should boost demand significantly should be announced sometime this summer. Other catalysts will be the company's 7 for 1 stock split that will be initiated at the close of business Friday. The company picked the perfect split size (it was the first time an S&P 500 stock split 7 for 1 in over 30 years) to eventually be included into the price weighted Dow Jones Industrial Average which will be a positive for the stock. Finally, I expect some new product to be announced by the end of summer. A lot of new product categories have been speculated on including several in the wearable technology space. I believe mobile payments could be an area Apple will launch a new product in as this would leverage its some 800mm iTunes members and build on its substantial ecosystem.

To summarize, Apple shares do not have nearly the upside potential they had early last summer. However, with its current valuation and possible catalysts the stock should still outperform the overall market. With the stock split taking place later this week, I can already see the title for my next article on this tech giant "Apple: $100 a share never looked so good". ACCUMULATE

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.