After eight weeks of seeing a plummeting value for Apple, Brian White of Topeka Capital Markets believes that the selloff has reached an “insanely insane” point. The company had a sharp selloff during its strongest quarter of the year, bringing its value up to 28 percent from its peak in September.
In relation to this, White noted it has delivered an annual growth that is 13 times greater than S&P 500 over the last eight years. However, the Cupertino-based company still trades at a 20 percent price-to-earnings ratio discount compared to S&P 500. In a note to investors on Monday, White said:
While we don’t expect Apple to grow (earnings per share) by 92% per annum over the next five years, we believe 20-30% growth reasonable based on the company’s slow market share in mobile phones and PCs, combined with growth opportunities in tablets and new potential areas such as Apple TV.
Yesterday’s increase in Apple stocks is considered as the biggest one-day gain since May 21, when it closed up 5.8 percent at $561.30. As reported by Washington Post:
Shares of Apple Inc. rose $38.05, or 7.2 percent, to close at $565.73 Monday. Even with the gain, the stock is down nearly 20 percent from the record high of $705.10 struck on September 21.
Apple on Higher Dividend to Investors: To Pay Out or Not to Pay Out
In relation to this, Apple had $121.3 billion in cash at the end of its fiscal year 2012. This amounts to almost $128 per share, which is 24 percent of the company’s stock price. Whether the company decides to payout a higher dividend to investors or not, White believes that Apple will still have about $204 billion in net cash by the end of their fiscal year 2014. This could amount to $212 per share or 40 percent of the current stock price.
As such, the dividends that Apple can afford to pay out in the future are significant, and there is no reason why Apple should not currently be paying out at least a 3-4% dividend yield (or $16-$21 per share) versus the current 2% yield (or $10.60 per share).
On the other hand, Topeka Capital Markets retains its $1,111 12-month price target for AAPL stock despite the recent losses. It should be recalled that Apple hit an all-time high of $705.10 when the iPhone 5 was launched. However, their stock slumped into correction and then into bear territory, bringing it down to almost 21 percent.