Apple at under $550 is a screaming buy. I'm not nearly has bullish as I was a year or even 6 months ago. The competition has finally caught up. Steve Jobs has been dead for over year and without him to keep things together, the team he built is slowly falling apart.
However, even if Apple's best days are behind it, it still has a fantastic future. The stock is incredibly cheap at under $550. The have around $130 in cash and a billion or so per week coming in. Earnings are not going to grow at 90% or even 50% per year from here. But 20% earnings growth from here is reasonable.
Apple earned $44/share in the past year. They are also paying $10/year/share in dividends. The stock is trading at 12X last year earnings. Of this $550, $130 is cash, so you are really only paying $420/share for the company. That's a P/E of 9 (NINE!) for a company that's conservatively growing at 20%+/year. 20%+ growth for a company of this size is incredible! On a valuation basis, Apple has never been this cheap in 5 years.
Assuming a conservative 20% growth rate, I expect them to make more than $53/share over the next year. Last quarter was a disappointment because they couldn't make as many iPhone 5's as they wanted to and they didn't sell as many iPad's as some people hoped. But they grew earnings 23% vs. last year and the stock dropped $130. Only for Apple is growing 23% year over year considered a "disappointment"!
Since you buy a stock for FUTURE earnings, not past, the market is giving a 7.5 P/E on Apple's forward earnings at today's prices. Unless you think Apple's earnings are only going to grow at less than 6% or 7%, the stock is too cheap. I can't think of any reasonable situation where Apple would only grow profits 6% in the next year. It's also under the 200 day moving average which it hasn't been in years.
Hence, I'm buying the stock here.
