Is the Time Ripe to Invest in Apple?

Apple (NASDAQ:AAPL), hovering around the $450 mark, was in an upward trend on Monday morning after spending the last week dropping precipitously. But according to John Buckingham, the chief investment officer at Al Frank Asset Management, a slight fall from current levels would, in fact, offer the perfect position to start adding the stock to investment portfolios.

“We aren’t quite ready to pull the trigger, as we did pare our target price to $683, but a drop close to $430 could be very tempting as the stock would then be trading for less than 10 times earnings, while the virtually debt-free balance sheet now contains $137 billion in cash (more than $140 per share),” Buckingham wrote in a note to clients, according to Barron’s. “We still have some worry that the exodus of former die-hard Apple shareholders has room to run, meaning that it could overshoot to the downside, but Apple is fast becoming a value stock again!”

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Buckingham did point out that the stock’s fall of more than $250 since hitting a closing high of $702.10 in September had hurt the portfolios it was part of. “Believe it or not, Apple has cost the Russell 3000 Growth index 274 basis points of performance since the end of September 2012, while its negative impact alone on the S&P 500 index has been 165 basis points during the same time span,” he wrote.

However, the reaction to the company’s fiscal first-quarter earnings may have been erroneous and overdone, the money manager added.

“The bad news was that the company’s gross margin dropped to 38.6 percent from 44.7 percent in the year-ago quarter, impacting the bottom line considerably, so much so that EPS was essential flat with last year’s $13.87,” he wrote. “Nevertheless, earnings per share are still projected to rise to $50.94 in fiscal 2014 and to $55.41 in fiscal 2015, which is a big reason that we are giving serious consideration to adding Apple back to our recommended list for new purchases.”

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