Apple’s popularity among investors has been waning. In the past year, Apple went from one of most overowned stocks to an underowned stock. The concerns are the same almost everywhere, slowing sales and the lack of a game changing device has caused alarm in the investment community. But Darren Chervitz, director of research and co-manager of Jacob Asset Management, says that’s all wrong, Apple is still a great investment.
Chervitz said every conversation about Apple should start and end with the valuation of the company. All metrics point to an all-time low valuation while being a superior company, according to Chervitz.
One of the metrics Chervitz uses to gauge the value of Apple is enterprise valuation or the cash-adjusted market cap. He said based on this, it shows Apple is trading at a level not seen in more than seven years. He said it’s cheaper than a lot of its peers and “this company has more cash than a lot of banks in this country.”
Chervitz said it’s more a of value company than a growth company, but at these valuations, 3 percent dividend yield and a huge buyback plan, he sees limited downside from these levels.
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Chervitz said he understands why people might be wondering if the vision is gone from the company. Since Steve Jobs died there hasn’t been a huge innovative product, but based on the Apple ecosystem, he’s very positive.
One example Chervitz uses is iTunes. There are 575 million people who use iTunes and there’s an enormous potential to monetize, according to Chervitz. ITunes Radio was just released, which is a Pandora competitor, and even with modest penetration rates it could become a $2 billion business, according to Chervitz.
“Right now, nothing new in the near term but I expect in the next 12 to 18 months you’re going to again see some real innovation from the company, which will make investors realize this is not a dying company,” Chervitz said.
Apple reports earnings after the bell Tuesday.
Disclosure: Chervitz owns Apple through a fund.
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