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Former Wired columnist and CEO of ADVFN Clem Chambers came onto CNBC Friday and called Apple (NASDAQ:AAPL) the short of the century. The main premise of his argument is that Apple is a large cap stock and should be valued like other large cap companies. He says,

If we value this company (Apple) as a normal large cap company, it should trade at $200 a share and no more.

He goes on to say that other large cap names within the sector trade at a 14 P/E while Apple trades above a 20 P/E ratio. Chambers argues that Apple's chart is a huge bubble, that Apple cannot function without Steve Jobs, and that "the dynamic with apple is everyone expects this story continue. One hiccup and the stock is back down to $200 a share." You can see his segment here.

Well...this guy is going to be unpleasantly surprised when he sees the stock trade at over $500 sometime within the next year. Apple has proven time and again that it can survive just fine without Steve Jobs. And while Apple does trade at a slight premium to other large cap companies, it does grow at 3-4 times faster than those companies. If anything, the stock is very undervalued at these levels. It only trades at a .77 PEG ratio which is far below par on its 5-year expected growth rate.

By contrast, Intel (NASDAQ:INTC) trades at a .87 peg ratio, IBM (NYSE:IBM) at a 1.14 peg ratio, Hewlett Packard (NYSE:HPQ) at a .83 peg ratio and Google (NASDAQ:GOOG) at a .99 PEG ratio. If anything, these companies are trading at a richer valuation to their expected growth rates than is Apple. While it seems somewhat insane to call Apple overvalued at these levels, it shouldn't come to a surprise to see people start to jump to that conclusion when looking at Apple's market capitalization.

I warned this past summer that Apple watchers would start to make sweeping valuation arguments based exclusively on its market capitalization. Clem Chambers targeted Apple's large market cap. as the main thrust underlying is "Apple is overvalued" thesis and don't surprised to see a lot more people make that argument as Apple marches to $500 and beyond. In the future, I'll be putting together a thorough analysis justifying a $500 price target. Stay tuned.

Source: Is Apple the 'Short of the Century'?