Piper Jaffray analyst Gene Munster on Thursday issued a research report in which he looked at Appleis share price compared with three hardware and three software competitors: Dell, IBM, HP, Adobe, Autodesk, and Microsoft. He concluded that the companyis stock wasnit "so pricey after all," despite sentiment on Wall Street that it trades at a premium price and thus has no room for growth.
The analyst wrote: "We believe the best valuation metric to provide a parallel comparison between AAPL shares and its hardware and software comps is: P/E/G [Price-to-earnings ratio divided by projected growth rate] excl. cash. Based on this metric, AAPL shares are priced below the relevant comps. Our take is that AAPL shares do not trade at a premium valuation."
He added: "Clearly the right valuation metrics to use on any given company are up for interpretation, but we believe this method provides the most consistent strategy for comparison."
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The analyst concluded by noting: "We believe Apple will continue to outpace the growth of its competitors in the coming years and therefore AAPL shares should trade at a premium relative multiple based on P/E/G (excl. cash). We continue to believe Mac market share will grow through 2H CY06 and CY07 resulting in strong earnings growth (Mac market share growth drivers: 1) Intel transition complete, 2) Boot Camp effect, 3) iPod halo effect.
"Assuming Mac market share does grow over the next two years, we believe on a P/E/G (excl. cash) basis AAPL shares will move above its comps."
Mr. Munster retained his "Outperform" rating on Appleis stock, with a US$99 price target. He also issued a report in reaction to Appleis settlement with Creative. We will incorporate his comments in an article to be published later on Thursday.
At 12:57 PM EST on Thursday, Apple shares were selling for $67.37, up 0.09% for the day.
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