This post by Brett Arends on MarketWatch makes the best case for Apple bulls that I have seen. Arends writes:
If you haven’t been living in a cave for the past week, you’ll know Apple’s stock price recently collapsed to $445, from a peak of $700 last year. Wall Street suddenly discovered that Apple faces competition from companies such as Samsung. And Apple didn’t give a confident outlook for the year ahead.
But this is still a fantastically successful company, and the stock is dirt cheap by almost any measure.
Let’s start with the basic numbers. Apple’s latest quarterly earnings show the company has $169 billion in cash and liquid assets, and just $69 billion in total liabilities. So the company is basically sitting on $100 billion in cash or equivalents — about $105 per share. (It has another $24 billion in commitments to buy components and pay leases on retail stores. Including those would change the numbers a bit, but not much.)
In short, Apple isn’t really a $445 stock. Net of cash, it’s a $330 stock.
That’s just seven times forecast earnings of $45 per share for the current fiscal year, which runs through Sept. 30. That’s half the rating of the rest of the stock market, which has historically traded at about 14 times forecast per-share earnings.
At current prices, Apple, net of cash, is less than six times forecast cashflow per share.
This analysis makes sense. [Content protected for Gold members only]