Apple Inc. (AAPL): Apple Stock Is a Huge Buy Even With Slower Growth

apple Inc. (AAPL) received another Wall Street cut to its price target Thursday, but that doesn’t change the investment thesis on Apple stock. It’s a buy.

Even the analyst who lowered his target price thinks so. Walter Piecyk of BTIG kept his buy call on AAPL while taking the target down to $130 from $141 a share.

The reasoning behind the haircut is old news by now. Piecyk is worried that the iPhone could lead AAPL to a 4% drop in revenue this year, as a top-line rebound could be delayed until 2017.

The analyst says data suggest that existing iPhone users are holding on to their current phones longer. Consumers who upgrade their iPhones when a new one debuts are an important source of revenue and have implications for Apple stock.

However, it may be premature to worry. Piecyk says we won’t know for sure for some time. From his note to clients:

“It will take a few quarters and the launch of the next iPhone to confirm if end users are, in fact, holding onto their phones longer.”

As evidenced by the buy rating, this is really just a tweak to the analyst’s AAPL valuation model. Even at a lower price target of $130 a share, Apple stock still has an implied upside of 20% in the next 12 months or so. Any investor should be happy with that.

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Apple Stock Won’t Be on Sale for Long

The big takeaway from all this is that AAPL stock is still a bargain. As we’ve argued before, it’s premature to proclaim the death of the iPhone, and even at a slower growth rate, Apple stock is a buy on valuation alone.

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This is a stock that has been overly discounted by a wide margin. AAPL stock changes hands at just under 11 times forward earnings. That’s up from 10 not too long ago. Why does this matter? Because that’s not how you value a tech stock with AAPL’s remaining growth potential.

Telecommunications companies get low price-to-earnings multiples because they’re all about dividends, not growth. Yet, Apple stock has a lower P/E than Verizon Communications Inc. (VZ) or AT&T Inc. (T).

Apple is a value stock picker’s dream thanks to valuation, cash flow and cash on the books. Apple has $6.92 in cash per share. Let’s back that out because you don’t pay cash for cash. That brings the share price down to about $102, or 10 times forward earnings.

And all this despite a compound annual growth rate of almost 12% per annum? Earnings multiples are supposed to be higher than long-term growth rates, not lower.

The only thing really wrong with AAPL stock is soft sentiment, and that probably won’t change until the iPhone 7 lands in the fall. It also means shares may not be on sale for too much longer.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.