After falling another 3.5 percent last week, Apple’s (NASDAQ:AAPL) stock started Thanksgiving week with some early boost of confidence as Topeka Capital analyst Brian White said the recent sell-off in the company’s shares was “insanely insane.”
According to White, while growth prospects for Apple in the short term were incredibly bright, there were significant long-term opportunities as well. “In our view, the selloff in Apple’s stock over the past eight weeks has gotten to the point of being insanely insane given the depressed valuation (CY13 P/E of 7.6x ex-cash), new blockbuster products for the holiday season, the attractive long-term growth opportunities that lie ahead and the company’s ability to distribute significant cash flow to investors,” White wrote in a research note to investors on Monday.
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According to the analyst, the current opportunity was ripe for those investors who may have “missed Apple or been under-weight” to buy shares before sentiment again turned positive for the company in the traditionally strong holiday quarter.
White made his point with an explanation on the company’s growth vis-à-vis the market. “Between calendar year 2003 through calendar year 2011, Apple has grown earnings per share by 92 percent per year versus just 7 percent growth for the S&P 500 Index,” the analyst wrote. “Essentially, Apple has delivered annual growth that is 13-fold the S&P 500 over the past eight years but trades at a 20 percent P/E discount (or 40 percent discount ex-cash).”
In such a scenario, Apple’s discount to the S&P 500 was a “head scratcher.”
White added that while he did not expect the company to grow its earnings per share by the same high rate of 92 percent per annum over the next five years, a growth rate of between 20 and 30 percent was reasonable “based on the company’s low market share in mobile phones and PCs, combined with growth opportunities in tablets and new potential areas such as Apple TV.”
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