This week, Apple (AAPL) made new highs, closing at $274 on Friday. A lot of traders are expecting the momentum to stop, and at some point, it will, but how high will Apple climb before it does?
To all the bears who think Apple is an $11 stock and will always be an $11 stock, I scoff at you! Apple stock is hilariously undervalued for a stock that has so many eyes on it. Although technical indicators are crucial, too many traders are looking for bad news on the chart, expecting to find “resistance” at certain levels. They are failing to realize how good of a fundamental play the Apple stock remains.
From a strictly valuation perspective, Apple is undervalued, even at new highs. I think even conservative valuations place this stock at around $300, while more aggressive growth could lead to valuation in the $350 or even $400 range.
Why? Just look at the numbers. The iPhone represents half of the value of Apple’s stock. Apple doesn’t just receive the $199 or $299 up front that a customer pays. It also receives a significant subsidy from AT&T. Right now, they receive about $600 per phone that they sell.
And look around. Everybody has an iPhone. Even people who can’t normally afford a high-end cellular device are splurging on this thing. This week, Apple released the iPhone 4G – the next generation in its iPhone line. The Apple store received ten times as many orders for the 4G as it did for the 3G on release date.
Look, history shows us that one or two companies always emerge on top of any sector. For soft drinks, it’s Coke and Pepsi. For search, it’s Google. You cannot be involved in the stock market without making some decisions about where stocks are going to go. If you expect Steve Jobs to bork the Apple business plan like he did in the 80s, then bet against Apple at its current pricing. If you expect Apple to run the cell phone market over the next ten years (and maybe even compete with Google in the search market in the next twenty), then long this stock as soon as you can, because it will go up for a very long time.
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