Apple Is Now Cheaper Than It Has Been in 12 Years

Apple (NASDAQ: AAPL  ) is cheap. It's a fact. Considering the massive 33% pullback that shares have seen over the past few months, combined with a rock-solid business, Apple's trading multiples have compressed further into value territory.

Earnings were relatively flat last quarter, but the company's P/E has still trended lower and is now just 10.66.

AAPL P/E Ratio TTM Chart

AAPL P/E Ratio TTM data by YCharts.

That's significantly cheaper than the S&P 500, and according to a recent Bloomberg report, we're talking about the biggest discount relative to the broader market in 12 years. By Bloomberg's estimates, Apple trades at a 29% discount to the S&P 500, a level not seen since December 2000.

At the same time, Apple has previously been proven to be disproportionately responsible for much of the market's earnings growth, highlighting how strange this discrepancy is. In fact, one technical analyst recently recommended a brave trade to capitalize on this divergence.

Oppenheimer's Carter Worth has recommended going long Apple while shorting the S&P 500 since the index has rallied significantly over the past few months while the Mac maker has gotten unjustifiably crushed. Worth believes the broader market has gotten ahead of itself and is set to pullback while Apple is due to bounce and head higher to approach $525.

The negativity surrounding Apple has reached a fever pitch, and that's dominated the minds of investors far more lately than the underlying fundamentals of the company. Analysts have toned down price targets on concerns of competition and margin compression, with Bloomberg pegging the median analyst price target at $613, down from $781 just five months ago.

That's still substantial upside from current prices and shows just how undervalued Apple has become in recent months -- so much so that investors are freerolling on numerous potential product introductions in the near future.

Will you take advantage of the biggest pricing discrepancy in Apple shares in a dozen years?

There's a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (5) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 13, 2013, at 7:33 PM, sammycooool wrote:

    How much should we pay for an outdated one trick pony? Apple is a great short, thanks.

  • Report this Comment On February 13, 2013, at 10:32 PM, millsbob wrote:

    good luck with that short -- you're gonna need it.

  • Report this Comment On February 14, 2013, at 7:07 PM, luxetlibertas wrote:

    @millsbob: 'sammy' is a troll, not an investor. There seems to be a whole army of these trolls roaming the internet.

    Price to earnings is a crude measure, the better way is to contemplate the future, even if your crystal ball is clouded.

    Apple has a strong brand, and wonderful opportunities, even apart from all their currently successful products. Even if Tim Cooks totally lacks the flair of his predecessor, he has many redeeming qualities. It would be disappointing indeed if it would suddenly fail in its undisputed leading technology role, and I fully expect many nice products and services from them.

    A point of worry is that on their software development side they seem to falter, and the logistics also got less reliable since Tim Cook got other responsibilities (but shortages of product is not the worst of problems of course).

  • Report this Comment On February 14, 2013, at 9:34 PM, eldetorre wrote:

    Apple is not the company it was. It is now a pure consumer electronics company with no moat at all. There is no innovation, just repackaging of existing tech into sleeker packages.

    The patents it has been awarded are way too generous. And it rabidly defends them because there is nothing else in the pipeline. By dropping the pro products they are essentially dropping R&D because the pro sector is where the kinks were worked out in innovation. Buy Apple for it's cash, but not for anything else.

  • Report this Comment On February 15, 2013, at 10:30 AM, fkim wrote:

    AAPL likes to rumble at courts instead of lab of R&D. It's bully in the block;an overgrown child who lost friends. Meaning, buyers and investors. This company is another yesterday's new.

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