Let's talk about the popular Apple Inc. (NASDAQ:AAPL). The company's shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$175 at one point, and dropping to the lows of US$135. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Apple's current trading price of US$148 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Apple’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Apple?
According to my valuation model, Apple seems to be fairly priced at around 6.91% above my intrinsic value, which means if you buy Apple today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $138.54, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Apple’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Apple generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 7.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Apple, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in AAPL’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on AAPL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Apple you should know about.
If you are no longer interested in Apple, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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