If you are an Apple (NASDAQ:AAPL) investor then you’ve likely been wondering for quite some time why the heck the stock has been trading at such a low multiple when the company has over $200 billion in cash on their balance sheet. Dipping as low as $92 per shares, equating to a PE ratio of just over 9, the stock has been pummeled due to the prospects of the company reporting the first ever decline in sales for the year. What investors have been ignoring however, is that even if there is a slight blip in sales for a quarter or two, Apple should return to their winning ways when the iPhone 7 is launches at the end of this year. When company’s like Microsoft, who likely have about the same future prospects in terms of earnings growth as Apple (NASDAQ:AAPL) does, are trading at a PE that’s more than three times that of Apple, something is wrong with valuations.
Today shares of Apple (NASDAQ:AAPL) are up $3.46 or 3.58% and have breached a key psychological level of $100. Perhaps investors finally are beginning to look ahead 6 months or so to the debut of the iPhone 7, which more than likely will see record sales in excess of 75 million in the fourth quarter. Just like with the iPhone 5s compared to the 5, the 6s didn’t sell as well because of only an incremental update. iPhone users look more to the form factor of the device rather than it’s internal components when deciding to upgrade. That’s why the new form factor of the iPhone 7 will be key to a strong end of 2016 and start of 2017.
Looking past the iPhone 7 Apple also is said to be working on a Car, in some capacity, along with a virtual reality device. Either of these new markets could lead to substantial earnings growth over the next 2-5 years, and the Apple Watch should also play a part in growth as well. If Apple shares can close above the $100 level, there is a good chance that it may act as support. There is no doubt that the stock is undervalued compared to its competition, and I wouldn’t be surprised to see shares trade at more than $130 by the time the iPhone 7 is announced later in the year.