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Why Apple Might Still Be Undervalued

Why Apple Might Still Be Undervalued
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After making history on Tuesday by touching the $700-billion market cap mark, Apple Inc. (NASDAQ: AAPL) was again flirting with that figure in early trade on Wednesday. Though some analysts who feel that the company is overvalued, there are others who find it undervalued.

Daniel Ernst, analyst at Hudson Square Research, is one of them. He was recently on CNBC discussing why Apple is still cheap and the future prospects of the company.

"$700 billion sounds like a big number, but if you look it at on an earnings basis, Factset says the S&P is trading on about 16 times next year's earnings. My number is Apple is 14.8 times […] at that $700 billion, they have $126 billion in net cash. So if you back that out, they're actually trading at 12 times earnings," Ernst said.

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"So really the company is not expensive and actually you can argue that it's cheap, particularly as, my second point is, the fundamentals are very, very strong. iPhone sales were up 16 percent year over year, in the September quarter they sold 170 million phones; Mac sales were up 21 percent [year over year], HP had PC sales declining last night; iPad still not great, but I don’t think they are done and as we look in 2015, we have the watch, we have the Apple payments."

Ernst continued, "I think they are still not done because they talked about what they are going to do with Health kit and Home kit and maybe as we start to see crash in the cable TV bundle and some of these things become available over the Internet, maybe Apple finally does take a run on TV."

Shares of Apple traded recently at $118.86, up 1 percent.

Posted-In: Daniel Ernst Hudson Square ResearchCNBC Tech Media Best of Benzinga


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