Why is Apple so cheap?

Since the launch of the iPhone in 2007, Apple has grown its sales tenfold. Apple shares have also performed strongly during this period, however sentiment around the company has recently mellowed as concerns arose over whether Apple and the iPhone in particular can sustain this growth. Apple’s current share price is 42% below its peak (Fig 13), and implies that cash flows generated by the business will decline at ~8%/year into perpetuity. We believe it is clear that the market’s short-term focus around quarterly iPhone sales is underestimating the opportunities. Apple is currently trading at an 8.5x 1-year forward P/E, near a historical low for the company over the last 10 years. We note that there are any few companies in the ASX 100 to be found at such attractive valuations, much less a company with such a proven track record of value creation and innovation as Apple, and see this as an excellent entry point into the stock. To read our full "Leading Edge" Report for December click here: (VIEW LINK)