Thursday, May 17, 2012 — Since 2006, Bullish Cross has only ever published four public buy ratings on Apple. The last such rating was published at the end of the day on Friday, June 17, 2011 and Apple capitulated and bottomed on Monday, June 20, 2011.
Today, we are initiating our 5th ever buy rating on Apple just about 11-months after the last recommendation we gave. We tend to only publish these buy rating under extraordinary circumstances, when Apple has been extremely oversold and when the stock’s valuation has become incredibly depressed. We also only publish these ratings once the markets have seen a substantial sell-off or prolonged period of consolidation.
The current conditions meet all of our criteria. As a result we are publishing our comments on why it is time to buy Apple. Notice that the last four buy ratings were made right at or near the exact lows each time. Our buy ratings are a little different than what one would normally expect in that we give a band where we feel the stock is a “strong buy” and where the stock is a “buy.” We also give a price target. But what we don’t do is publish an ongoing buy rating. Our buy ratings are thus temporary in nature.
Bullish Cross has never missed a long-term price target on Apple as you can see here. Today we feel that Apple is a strong buy anywhere between $500 and $530 a share and a buy between $530 and $550 a share. We expect Apple to test $750 a share sometime before the end of this coming January. That is roughly 50% higher than where the stock is trading today.
Now here are the reasons why we believe its time to buy Apple and why we feel the valuation is incredibly attractive today. At $533.52 a share, Apple trades at 13x last year’s earnings and at only 10.56x our expect October earnings. Those are incredibly low valuations even for Apple. At the November 25, 2011 lows, Apple traded at a 13.13 P/E ratio. So today, Apple is trading at a lower valuation than it was at the November lows. At the June 2011 lows, Apple was trading near a 15 P/E trailing P/E ratio.