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Apple ‘Worth a Lot More’: Damodaran

Tuesday, 5 Feb 2013 | 12:25 PM ET
Apple 'Worth a Lot More': Damodaran
Apple stock represents a value play and is worth much more than $450 per share, New York University finance professor and valuation expert Aswath Damodaran says.

Apple stock represents a value play and is worth much more than $450 per share, New York University finance professor and valuation expert Aswath Damodaran said Tuesday on CNBC.

"I think it's good news that the traders are leaving and the momentum is gone," he said.

On "Fast Money," Damodaran said that the stock was worth $600 per share.

Shares of Apple traded at $452.50 midday.

"This is a company that's being priced for no growth and compressed margins already, so I don't understand why the market would react the way it does to news that is, in a sense, is not being built into the stock price," he said.

Damodaran said that the stock's price decline was shaking out a certain type of investor.

"If you're a value investor, a true value investor, you've got to invest when you're not comfortable," he said. "Right now, am I comfortable investing in Apple? Not really, but I will invest in it because that's the time to get into a stock if you're a value investor.

"I'm going to buy Apple as a business, and I think I'm getting a pretty good business for the price I'm paying."

Damodaran cautioned against looking to institutional investors for a tell on what the stock will do next.

"I think large institutional investors and equity research analysts are followers, not leaders. They're going to be in the stock if it's up 100 points. They're going to be down if it's down 100 points," he said. "So, watching them for future direction is, I think, in a sense, misleading because they're going to be on the bandwagon after it switches sides."

Damodaran added that he was not surprised that the stock remained in a "holding pattern."

"I think that's precisely reason now the time, if you're a value investor, to think about buying the stock," he added.

Josh Brown of Fusion Analytics agreed on the valuation aspect.

"I think the way to look at Apple is, this is a stock that a lot of the hard-core momentum traders have actually abandoned. Things seem to be quieting down. Volatility seems to be quieting down," he said. "If you're a value investor and you think this company has been unfairly tarred with the no-growth brush, then this is where you buy it."

Traders, he added, were less likely to benefit from Apple stock.

"If you're a trader, if you're someone looking for that higher-beta, multi-point move, you probably move on," Brown said.

Apple shares, he added, were worth in the "mid-$400" range.

OptionMonster's Jon Najarian said that the stock needed to break above $462 and hold it for 24 hours before it was worth playing.

"It's sort of in a no-man's land where it is right here," he said.

RoseCliff Capital's Mike Murphy called the stock "broken" as a trade but workable as a long-term investment.

For those investors, "Apple right now is a screaming buy in my opinion," he said.

"I don't think Apple as a company, as a business is broken, so it's a name to hold on to," Murphy added.

Trader disclosure: On Feb. 5, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Joe Terranova is long VRTS; Joe Terranova is long AAPL; Joe Terranova is long MJN; Joe Terranova is long JPM; Joe Terranova is long DIS; Joe Terranova is long GS; Joe Terranova is long SWN; Joe Terranova is long XOM; Mike Murphy is long GS; Mike Murphy is long TGT; Mike Murphy is long FB; Mike Murphy is long TOL; Josh Brown is long AAPL; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long TLT; Josh Brown is long XLF; Josh Brown is long TGT.

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