Apple Stock Looks Cheap Here to Value Buyers and Short Put Traders
Apple (AAPL) stock is moving up off of lows after its fiscal Q3 earnings report released on Aug. 3. Value investors are buying AAPL stock based on its powerful free cash flow. As of Friday, Sept. 1, AAPL closed at $189.46.
Apple's earnings also appeal to traders who sell short out-of-the-money (OTM) put options. This is because they provide a way for investors to make additional income.
Apple stock has a low 0.51% dividend yield. So, shorting OTM puts while also owning shares in AAPL stock increases investors' income while they wait for AAPL stock to rise.
Apple's FCF and Price Targets
I discussed Apple's earnings in our last Barchart article on Aug. 6, Apple Stock Tumbles After Earnings, But Its Free Cash Flow Growth Makes It a Buy. I showed that AAPL stock could be worth between $206.19 to $257.88 per share based on its powerful free cash flow (FCF).
This is because by applying a 41% FCF margin to forecasts of$407 billion in sales for the year ending Sept. 2024. This comes from estimates of 68% FCF margins from its services division and 30% FCF margins from products. Since services will be about 30% of sales, the combined margin is 41.4%.