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Apple Shares Gain as Stock Seen Undervalued

Nov. 19 (Bloomberg) -- Apple Inc. advanced the most in almost seven months as analysts said a two-month stock slide is unjustified given brisk demand for the iPhone and iPad.

Shares of Cupertino, California-based Apple rose 7.2 percent to $565.73 at the close in New York.

Apple, which overhauled most of its product lineup ahead of the holiday shopping season, has lost about a fifth of its stock market value since hitting a record on Sept. 19. It trades at a 8.4 percent discount to the Standard & Poor’s 500 Index on a price-to-earnings basis, after being valued at a premium for most of 2012, according to data compiled by Bloomberg.

Even amid investor concerns about product shortages, stiffening smartphone and tablet competition and management changes, demand for Apple’s products remains strong and the stock slide is unfounded, Brian White, an analyst at Topeka Capital Markets, wrote in a research report today.

“The sell-off in Apple’s stock over the past eight weeks has gotten to the point of being ‘insanely insane’ given the depressed valuation, new blockbuster products for the holiday season, the attractive long-term growth opportunities that lie ahead and the company’s ability to distribute significant cash flow to investors,” White said. He recommends buying the shares and has a 12-month price estimate of $1,111.

Katy Huberty, an analyst at Morgan Stanley, also said today that Apple’s shares are a “discount” because of the recent drop. Sales of the iPhone 5 and iPad mini are providing a boost, while sales in China and other emerging markets such as Brazil will sustain the company’s growth longer term, she said.

China Sales

Huberty said recent meetings with Apple’s suppliers in Asia point to better-than-expected iPhone and iPad sales. Analysts are predicting 46 million iPhones and 23 million iPads to be sold during the quarter that ends in December, she said. China Mobile Ltd., that country’s largest mobile-phone carrier, also may add the iPhone by the second half of 2013, Huberty said.

Of 62 analysts surveyed by Bloomberg, only two recommend selling the shares. The average 12-month target price is $766.60.

To contact the reporter on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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