How Much is Apple Worth? (AAPL)

Question: “I’m thinking about buying stock in Apple Computers, but how much is Apple worth?”


Answer: Good question. For value investors, the main question they ask is just that–how much is this stock actually worth, intrinsically.

According to our estimates, Apple stock (ticker: AAPL) is worth about $192.95 as of this writing (December 31st, 2008).

This is based on an estimated earnings-per-share growth of 20% (which is pretty conservative) through next year and a price-to-earnings ratio of 30 (which has been about average for Apple).

*Note: a share of stock is always equal to the earnings-per-share times the price-to-earnings ratio.

Due to the financial crisis and the turmoil in the markets that 2008 has ushered in, Apple and other stocks have been thoroughly pummeled. It’s P/E ratio as of this writing sits at a paltry 16.

So How Much is Apple Actually Worth?


Well in 2008 Apple notched earning of $5.36 per share, up from $3.93 the year before, a growth of more than 30% (Source: Yahoo! Finance). This makes me feel that the 20% projection is conservative.

For 2009, our model expects Apple to earn about $6.43 per share. If the P/E ratio goes up to the normal level (which it will if it once the market returns to normal if it continues performing so well) of about 30, that leaves us with a share price of $192.96.

As of this writing, Apple is trading at less than $90 per share, less than half of what it’s worth.

In the words of Jim Cramer…”BUY, BUY, BUY!”

Here’s another opinion on how much Apple is worth

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