Is Apple Finally Cheap Enough?
Apple (NASDAQ:AAPL) is now trading at a 29 percent discount to the Standard & Poor’s 500 Index, close to the widest gap since December 2000, Bloomberg said on Wednesday. The iPhone maker has lost more than $200 billion in market value after falling 33 percent from its mid-September highs on concerns of slowing profit growth and falling profit margins. Increased competition and talk that it was losing its innovation edge has also hurt the world’s largest company.
According to the publication, while analysts on average have cut price targets by 21 percent since the stock peaked in September, shares would rise 41 percent to $661 if investors valued the stock at the price-earnings ratio of the S&P 500. But with the shares at their cheapest in 12 years, are large investors betting on a rebound yet?
According to Gamco Investors, analysts were being unfair in their negative assessments of the company. “Apple is being held to a standard unlike any other company,” Gamco chief investment officer Howard Ward told Bloomberg. “Apple is not the zombie it is being valued like.”
According to a U.S. Security and Exchange Commission filing, Omega Advisors’ Leon Cooperman is said to have sold his holdings in Apple stock recently and purchased shares of Facebook (NASDAQ:FB) instead. Cooperman had earlier disclosed holding 266,000 shares of Apple. Joe Terranova of Virtus Investment Partners said Cooperman’s exit may prompt some other investors to enter the iPhone maker. “The obvious thing would be to say, ‘OK, well, a big guy like Leon Cooperman is getting out of Apple. Now I want to buy it,’” Terranova said on CNBC, adding that such a move would be wrong.
According to David Kessler from value investment firm Robotti & Co, they were still waiting and watching. “Up until this point, we’ve definitely been comfortable not swinging at the pitch,” Kessler told Bloomberg. “As the valuation does come down it gets more interesting, but it hasn’t gotten to a place yet where we’d be comfortable investing.”
Most of the latest talk has centered around Apple’s practice of holding on to its massive cash funds instead of diverting them back to shareholders. Hedge fund Greenlight Capital launched a lawsuit against the company last week in an attempt to get it to start issuing preferred stock with a perpetual yield.
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