Is Apple Inc. (NASDAQ:AAPL) Potentially Undervalued?

Apple Inc. (NASDAQ:AAPL) led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Apple’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Apple

What is Apple worth?

According to my valuation model, the stock is currently overvalued by about 40%, trading at US$383 compared to my intrinsic value of $273.26. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Apple’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Apple?

NasdaqGS:AAPL Past and Future Earnings July 10th 2020
NasdaqGS:AAPL Past and Future Earnings July 10th 2020

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. With profit expected to grow by a double-digit 14% over the next couple of years, the outlook is positive for Apple. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in AAPL’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AAPL should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on AAPL for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for AAPL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Apple. You can find everything you need to know about Apple in the latest infographic research report. If you are no longer interested in Apple, you can use our free platform to see my 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. 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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