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Apple Stock Is Way Below Analysts’ Targets

After today’s roughly 3% declines, Apple (NASDAQ:AAPL) is at its lowest levels since January 2012.

A great post from Bespoke Investment Group explores how far Apple has fallen, particularly in respect to sky-high analyst price targets. The discount is more than 30% — the highest among the 100 largest stocks in the S&P 500 Index.

So is this a buying opportunity? Maybe. But remember that price targets can continue to drift lower, too, thus correcting this ratio by lowering the ceiling.

The current median price target from the “smart money” is $728, according to Bespoke. Thomson/First Call data shows similar readings with a $730 mean and a $745 median.

We have to throw out some outliers here, of course. I’m thinking particularly of the gimmicky $1,111 target from that yutz Brian White who’s just looking to make a name for himself. However, even among the more rational estimates, there still is a big premium priced in. Consider that just a week ago, Barclays moved its target down from $800 but still plots a price of $740 for Apple stock and rates it “overweight.” Before that, in December, RBC Capital moved its rating down to $725 from $750 but still rates AAPL “outperform.”

So while the targets are coming down, they remain significantly above current valuations. That’s a good sign.

Also consider that the margin between Apple’s current pricing and targets is massive compared with other large caps:

Natural gas plays like Devon Energy (NYSE:DVN) and Apache (NYSE:APA) are discounted almost 25%, as pricing for the commodity remains super low amid a glut of supply thanks to the fracking boom. Wall Street apparently thinks that environment can’t last forever and has set higher targets for these gas stocks despite current troubles.

Oil service stocks like National-Oilwell Varco (NYSE:NOV) and Anadarko Petroleum (NYSE:APC) also are trading at more than 20% discounts thanks to weak demand and apparently Wall Street analysts have faith that crude pricing and exploration will pick up in 2013.

But Apple is the biggest gap by a long shot. Just look at the table — especially the fact that it trades at a significantly bigger gap than Microsoft (NASDAQ:MSFT)!

Now, I’m not saying that analysts are always right. History is littered with bonehead calls by “experts” who revise their targets down after a big headline they never saw coming obliterates a stock. However, Apple is widely covered and has 49 brokers watching it as of right now. It’s possible the majority of them could be very, very wrong … but you have to at least note their point of view.

Furthermore, while analyst targets are frequently inflated, you have to question whether the gap is large enough to work in some wiggle room. For instance, if Apple goes up just 20% from here, it might never fulfill most targets — but that’s a hell of a gain for those individual investors looking for outperformance in 2013.

In full disclosure, I am an Apple shareholder, so some reluctance to admit defeat might be coloring my perspective. But I, for one, am encouraged by this massive gap because it shows a big move is in order — either significantly up for the stock, or significantly down in the forecasts.

I guess we will find out shortly which one. Apple reports earnings on Wednesday, Jan. 23.

Related Reading

Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he held a long position in AAPL but none of the other stocks named here.

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  • berlinoa

    … nice datatable showing that fundamental analysis and price anticipation based on that idea is defintely at best a ‘long term trade’, whereas the technical analysis will help folks who care making money in the short to mid term …

  • j j

    Analysts are always right.? LOL.

    • Jeff Reeves

      Fair point to be skeptical of “experts” with their price targets that are so frequently wrong. However 49 people have targets on Apple – and even if some of them are hucksters and all of them are slightly inflated… well you have to admit there’s plenty of margin for error. Maybe 30% isn’t likely but a run back to $550 would be a quick 10-15% gain from here. That’s nothing to sneeze at.

  • j j

    Another one who lost his halo for me after this apple disaster — Gene Munster. I’ll never believe him again.

  • dogmatica

    If Apple grows profit at roughly 25% from last year, then $1110 equates to a PE of 22. Is this a reasonable PE for a company stashing away $50 billion annually? Well, is AMZN’s PE of 3300 reasonable, or its forward PE of only 150; or NetFlix bouncing between PE’s of 120-280; or Googles at 23??? Keep in mind that Apple didn’t just beat these guys, they crushed them!

    The sheer stupidity of Jeff Reeves calling White a “yutz” who’s “looking to make a name for himself” is classic; in fact, it’s bizarro-world, where everything’s backwards, meaning that White’s analysis and reasoning is far more sound than those with targets well below his, and, it’s analysts with much lower targets–in many cases insanely and irrationally low–who appear to be trying to be make names for themselves, and who should be called out.

    I challenge anyone, especially Jeff Reeves, to find any large-cap company that has performed as well as Apple has for the past 5 years while also being straddled with a PE ratio as low as Apple’s. Apple’s valuation is so idiotic and asinine it’s beyond belief.

    And, fundamentally, nothing has changed for Apple, nothing. There simply are no new “big headlines” in regards to Apple. All of the tripe written about Apple lately is just rehashed, very-poorly-interpreted/analyzed information. There seems to be one rulebook for Apple and another for all/most other companies. And no matter how successful Apple has been, compared with these others, they have always been valued at ridiculously low levels.