Publish date:

Expert Says: Keep It Simple, Buy Apple Stock For 40% Upside

Apple stock has been down 9% from the early September peak. One famed expert sees the pullback as an opportunity to buy the dip for 40% gain potential.

Gene Munster, from Loup Ventures, is a well-known money manager who follows Apple stock  (AAPL) - Get Apple Inc. (AAPL) Report closely. Recently, he offered his bullish take on the Cupertino-based company. Today, the Apple Maven takes a closer look at his arguments and explains why Mr. Munster is likely correct in his assessment.

Figure 1: Wall Street sign.

Figure 1: Wall Street sign.

(Read more from the Apple Maven: Apple Stock: Rough September Can Be Great For October Returns)

Gene’s take on AAPL

In his interview with CNBC, Gene Munster seemed to understand why Apple stock price has remained stuck below $150 apiece for the past few weeks. According to him, the following factors help to explain the malaise in share price, which now sits below mid-July levels:

  • The current debate around the federal government’s debt ceiling adds uncertainty to the markets in general;
  • Although inflation worries have eased (the five-year implied rate dipped from 2.7% in May to 2.5% now), they remain an overhang;
  • The Fed is about to start unwinding monetary easing, which should eventually lead to higher short-term (and maybe longer-term) interest rates.

However, Mr. Munster seems to think that the above are merely near-term distractions to what is a much more optimistic narrative for Apple stock in the long term. The managing partner explained his bullish rationale very simply:

“This is going to be a buying opportunity, because [Apple is] fundamental to our lives. […] It's a pretty easy decision for me. The combination of hardware, software and services should help to push the stock higher from current levels over the next two years.”

Gene even tagged a price target on AAPL shares. According to him, the stock should rise to $200 apiece over the next one to two years, particularly after the short-term headwinds are left behind. At this target, the implied upside opportunity over the next 12 to 24 months is a compelling 40%.

(Read more from the Apple Maven: 3 Reasons To Buy Apple Stock This Week)

The Apple Maven’s opinion

Gene Munster’s take on Apple stock is consistent with how the Apple Maven sees the investment thesis. Most of what has been driving stock prices down lately are largely unrelated to Apple’s core business. Therefore, recent weakness points at a buy opportunity, in my view.

In what pertains to fundamentals, Apple seems to be doing just fine. Prior to, during, and after the pandemic, the Cupertino company managed to deliver outstanding results that topped the expectations of the most bullish analysts. Now, early signs suggest that the iPhone 13 will be a hit in 2021 and 2022, suggesting that Apple’s financial performance should continue to impress in the foreseeable future.

Lastly, investing in Apple after a pullback has consistently proved to be a smart move, as I have discussed in my “best strategy” article. True, AAPL is now only 9% below all-time highs, which is far from a once-in-a-lifetime opportunity to buy the dip. Still, the share price decline seems to be decoupled from company-specific factors, which I believe is good news for bargain hunters looking for an entry point.

Twitter speaks

Loup Ventures’ Gene Munster believes that Apple stock should be worth $200 apiece in the next 12 to 24 months, for 40% upside from current levels. What do you think of the famed investor’s target?

Is the price right?

Looking at a company’s business fundamentals is only half the work needed to find a good stock. How much one pays to own the shares is a key factor in the success of any investment. This is why valuation analysis is so important.

Alpha Spread’s user-friendly platform allows you to estimate a stock’s fair value –through valuation multiples, discounted cash flow, and more. I believe that the service is a must for anyone looking to own the right stock at the right price. Check out alphaspread.com and get started with a 7-day free trial.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)