Apple's Share Price In The Context Of Risk And Reward
by Nathan Hamilton
As analysts (myself included), we can feverishly study the numbers and pore over research that ultimately results in a high level of false confidence in less-than-precise forecasts. Thus, making a quick decision to purchase a distressed stock gets bogged down in details. I believe a back-of-the-envelope approach can help investors be nimble enough to act when prices are out of line with fundamentals. Such is the case with Apple (AAPL), and I will present to you what I call my "back-of-the-legal-size-envelope" valuation that has helped me opportunistically profit with AAPL. This rough valuation method helps to understand the downside risk and value of AAPL's existing business, while also focusing on incremental upside from new product revenue. Here are my forecasts for each operating scenario through 2013 (I have also included my base forecast and worst-case forecast details below): read more »
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