Barron's: Apple is worth $194

From Tae Kim’s Why There’s Still Plenty of Value in Apple’s Core in this week’s magazine ($):

Another mediocre product cycle doesn’t change Apple’s attributes: a bulletproof balance sheet, a stellar brand, a loyal customer base, and a sticky ecosystem of software and services. iPhone users are still likely to upgrade to another iOS device due to its high levels of customer satisfaction.

Apple shares now trade for 12 times projected fiscal-2019 earnings per share of $12.24, compared with 14.2 times for the S&P 500. The smartphone maker’s stock averaged a forward earnings multiple of 13.6 over the past five years, according to Bernstein. Apple is even cheaper when taking account of its $130 billion net cash position. The forward P/E ratio is about 10 when Apple’s net cash is stripped out.

Barron’s has covered Apple’s ups and downs over the past two years. At year-end of 2017, we predicted Apple’s market value could rise to $1 trillion in 2018. It reached that milestone in August.

Then, in November, we suggested that Apple stock could fall about 15% to $165 as the weak iPhone product cycle became increasingly evident. Apple shares hit $165 a month later. We said that was a good entry point, even with a bumpy ride still to come. Our latest call was a bit early, with the stock now trading at $148.26…

With Apple’s stock down, there are multiple ways to win. The stock now yields a generous 2%. Assuming Apple’s multiple returns to its 13.6 average, the stock is worth $166.46. Add back $27 in net cash per share—a logical step given that Apple has finally promised to bring its cash position to zero—and Apple is worth $194, 31% above its latest close.

My take: Impressive track record. Eerily so.