Motley Fool: AAPL is Hardly Overvalued

by , 4:55 PM EST, November 30th, 2007

Responding to a posting that Apple's stock is vastly overvalued, Tim Beyers did some research and proposed that AAPL is hardly overvalued in his analysis at The Motley Fool on Friday.

One possible issue that leads to an estimate of over valuation is that some observers just can't believe that Apple could join the ranks of companies with a value over US$200B, such as Berkshire Hathaway, Exxon Mobil and China Mobile.

Mr. Beyers noted that there are now 18 companies with that kind of market cap despite the jittery nature of the stock market. Even more intriguing, "Apple's growth trajectory no longer depends purely on innovation," he wrote.

Looking at some financial projections, Mr. Beyers extrapolated the magnifying power of Apple's retail stores to expose customers to Apple's products. For example, with a very conservative estimate of Apple's retail store growth, they should have 395 stores by the end of fiscal 2011. Not that far away.

Again, being very conservative, those stores contribute about US$21M in revenue per year. Even with only 17% contribution to Apple's total revenue, that $8.2B in revenue equates to a company posting US$48B in total revenue and worth as much as $306B in 2011.

"So if you'll permit me, I'd like to suggest something crazy.... Maybe Apple is valued exactly as it should be," the author concluded.