Apple Stock a BIG buy at current levels

Apple

Apple stock has fallen over 20% since its recent high a few months ago. The stock is currently trading in bear market territory around $104.00. The stock had fallen to as low at $92.00 at market open on Monday. Shares recovered within minutes after hitting its 52 week low. Investors are concerned about growth in China, Apple’s second biggest market. Apple CEO, Tim Cook reassured investors with a private email to CNBC host Jim Cramer this morning. The email was eventually made public. 

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.”

Apple currently has a P/E ratio of around 12 and a forward P/E of 10.74, one of the lowest among tech companies. The company continues to pay a healthy dividend of 2% and has a massive buyback program in place. The companies current cash balance is around $200 billion, and continues to grow every quarter.

Apples growth story is still in-tact. Only 30% of iPhone users have upgraded to the latest iPhone 6. A new version of the iPhone is scheduled to be released in September. A majority of iPhone 5s users will potentially purchase the 6s as they will be up for an upgrade. Additionally, China will be Apple’s biggest market after the U.S. within the next few years. A recent note from analysts on Barron’s.com stated that Apple has not even yet penetrated into the Tier 3-5 cities and that 4G-LTE market has only been penetrated by 12%. There will be more than 40 stores in China by 2016.

After the market realizes that Apple’s growth is still intact, shares should recover. At a 15 P/E, shares could trade around $140. Thats an upside potential of over 25%.