Wednesday, December 16, 2015

Apple: It's all about the valuation

       Apple is now priced as if it is projected to have negative growth.  Using a discount rate of 9%, which is probably high, if Apple can maintain its current earnings, the value per share comes to $102.  But that ignores net cash.  Apple has net cash of about $26 per share.  That brings the total value to $128.  Not an Ichan like number, but still a good deal more than the market price of $110.  This implies that the market is predicting significant negative growth for Apple.  Admittedly Apple faces some challenges, but with good management it should be able to at least maintain current earnings.  It looks like Apple is now cheap.

1 comment:

Anonymous said...

Dear Sir,

Would you please expand on what an appropriate discount rate for Apple might be ?

I think that would add a lot of value to your article.