As the price of a stock increases rational investors usually take a pause to assess whether the run is over. Apple
Inc.’s (NASDAQ:AAPL) rise has defied this trend and as the stock continues its metor rise, the company is garnering the attention of both institutional and retail investors.
Apple
is the most crowded trade on the planet right now. The company is the top owned stock by hedge funds, and has dozens of sell-side analysts watching every single announcement by the company and price move.
Retail investors cannot get enough of Apple. As usual, most people tend to equate a good company with a good stock, regardless of the price which they are paying for it. While this works sometimes, the vast majority of times, people pay for this type of attitude.
Apple does not seem so expensive. The stock is trading at approximately a price earnings ratio of 15. If you subtract the giant cash hoard (ignoring the fact that 66% is overseas to avoid taxes), the company’s price earnings multiple net of cash is closer to 11. Additionally, the new iPAD is already out of stock, Apple will have to keep production up at a rapid pace.
What is interesting to note is Morgan Stanley (MS) in particular, which announced this morning that the stock could go to $960 a share. Morgan Stanley sell-side analyst, Katy Huberty makes the case for this number using project using fair assumptions of earnings growth