Apple Stock Still Trading At 'Much Larger Discount' Than 3 Years Ago

Apple Inc. (NASDAQ: AAPL) shares currently trading at “about the same absolute multiple it peaked at in mid-2014 ahead of iPhone 6 launch,” according to Cowen’s Timothy Arcuri. The analyst believes that on a relative basis, the stock is still trading “at a much larger discount to the market even at the same absolute P/E today vs mid 2014.”

Arcuri maintains an Outperform rating on the company, while raising the price target from $135 to $155.

Upside Potential

Arcuri mentioned that while there was significant potential for multiple expansion for Apple, the consensus expectations for the company were still too low.

The analyst went on to say that field checks for near-term iPhone 7 and 7+, as well as early reads on the new iPhone model builds support the view that Street expectations were “way too low” for the second half of calendar year 2017 and calendar year 2018, with an aging base, especially in China, forming “a powder keg for this launch.”

In addition, the field checks imply an upward revision in iPhone supply for fiscal year, second-quarter 2017, from 49.5 million to 51.5 million unit, with an increase for fiscal third-quarter 2017 from 38.5 million to 41.5 million, with both revisions driven solely by additional iPhone 7+ units.

Estimates Raised

“We are raising our iPhone unit estimates for both Qs and continue to see ASP (average selling price) tailwinds w/mix shifting to the premium model,” Arcuri stated.

The iPhone unit estimate for fiscal second-quarter 2017 has been raised from 48.5 million to 50.5 million, to account for some pull-ins from the December quarter.

The revenue estimate for fiscal second-quarter has been left unchanged, since iPhone revenues were to a large extent offset by lower estimates for the Apple Watch, Mac and Services. However, the analyst pointed out that the revenue estimate was still more than $1 billion above the consensus forecast.

New iPhone builds add up to $110 million–$120 million for calendar year 2017.

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Image Credit: By Kārlis Dambrāns from Latvia (iPhone 7 Plus) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons