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Apple’s Odds of Being Cheap Stock Put at 90%: Chart of the Day

Apple Inc. (AAPL) has a 90 percent chance of being undervalued after a four-month drop in shares of the iPhone and iPad maker, according to Aswath Damodaran, a finance professor at New York University.

The CHART OF THE DAY tracks Apple’s stock performance since the start of 2012. Last week’s close of $439.88 was the lowest in a year and 37 percent below its record set on Sept. 19. Apple rose $9.95 yesterday to $449.83.

Damodaran, who has written books about stock valuation, arrived at his figure by using a $440 share price and estimating the Cupertino, California-based company’s revenue growth, profit margin and cost of capital. He presented the results two days ago in a posting on his blog, Musings on Markets.

Apple’s shares are a buy for “value optimists” who are willing to go against the prevailing opinion and are confident in their analysis, he wrote. Damodaran added that he bought an unspecified number of shares at $500 each earlier this month.

The purchase followed his sale of a undisclosed stake in Apple near the end of last year’s first quarter, when the stock surpassed $600 for the first time. Both trades are mentioned in the chart.

Damodaran valued Apple at $609 a share a month ago. The company’s fiscal first-quarter earnings report did little to change that estimate, the posting said. The results, released last week, showed the slowest sales growth since 2009 and the first decline in earnings per share since 2003.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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