Apple Is Cheap Enough to Hit $1,000: Five-Star Manager
John Burnham, five-star manager of Burnham Funds, thinks Apple can hit $1,000 a share.
He sure would like it to. Apple is his funds’ top holding—and has contributed to Burnham Funds being up 28.41 percent in the last three years, according to Morningstar data.
“Sure [$1,000 a share] is possible. Not tomorrow. But with a stock at 11 times earnings, it seems possible to me,” said Burnham.
He’s referring toApple’s current valuation, which has stock investors paying 11 times the stock price for the company’s future earnings growth.
“Right now, the stock’s cheap. Really cheap,” added Burnham. The valuation seems to have convinced investors. The stock hit another record on Thursday, surpassing $547 per share.
Burnham’s comments come on the heels of an earlier $1,000 Apple prediction by Apple’s co-founder, Steve Wozniak. “I actually believe that. Apple has that much growth left,” he said.
Co-founder Wozniak expects Apple television product development, equipped with voice operation capabilities, to become relatively near-term reality and drive further Apple growth.
Apple’s sheer size may slow it down, however. Burham’s comments run counter to the Street’s today, which expects a correction , based essentially on the law of large numbers. The current stock price is high above its 50-day and 200-day historical moving average.
“I’ve been around for 52 years in this business. I don’t really worry about that. Microsoft had similar growth years ago,” said Burnham.
But something about Apple does worry Burnham: “They need to do something with this $100 billion,” he said, referring to the company’s cash on hand.
Burnham thinks Apple’s decision to opt out of dividend payments is the wrong move. “They don’t like to spend their cash. I don’t know what they’re going to do with it. They have about $100 a share in cash, and it’s earning them nothing. They should pay a dividend.”
In the meantime, investors will watch as Apple’s much-anticipated iPad3 launch is set for Wednesday. At the same time, the company may also relaunch a less expensive version of its current iPad 2.
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John Burnham personally owns Apple stock, which is also the top holding in the Burnham Fund portfolio, according to the firm.