Apple’s current valuation is “ridiculously low” says one fund manager.
Don Lato, President, Padlock Investment Management was on BNN’s “Market Call Tonight” yesterday with host Michael Hainsworth.
Lato says has liked Apple for some time, and a recent bump in the iPhone-maker’s shares price isn’t pushing him away from the stock.
“Even if you look at 10% growth, which is well below what they have generated in earnings growth historically, the stock is trading at just over twelve times this year’s earnings, he says. “Strip out the cash,” adds Lato, “it’s about eight times this year’s earnings.”
Lato says there is renewed interest in Apple over the past few weeks because of Carl Ichan’s actions. Earlier this month, Icahn tweeted that he had built a “large position” in the stock. The famed activist investor said he felt the stock was undervalued and that he had talked to CEO Tim Cook about ways to unlock shareholder value.
Lato says Icahn’s interest is just a sideshow, and says the real value of Apple will be determined by great products and customers loyal to its ecosystem, both of which he believes it still has in abundance.
“I just think the days of Apple’s innovation are not behind them,” says Lato.
The Padlock Investment Management fund manager says concerns about eroding margins and internal cannibalization from rumoured new, cheaper versions of the iPhone are overdone, noting that the company did exactly the same thing with the iPod.
Lato regards Apple as one of his current “Top Picks”. At press time, shares of Apple were down 2.22% to $491.81.