Hugh Johnson: Apple has at least 30% upside potential

Investors looking for value may find it in an unexpected place, according to Hugh Johnson of Hugh Johnson Advisors: Apple.

“The upside potential, in my judgment, is at least 30 percent. I know everybody is worried about the fact that there is a slowdown in smartphones … but also a slowdown in China. I understand that,” Johnson CNBC’s Power Lunch on Tuesday. “But keep in mind we’re going from 50 million middle-class buyers of iPhones … to about 500 million in the next five years.”

Shares of the tech giant popped more than 2.5 percent Tuesday, but have fallen more than 8 percent in 2016.

Apple in 2016

Johnson added he thinks the broader market is oversold and that stock market investors will see sizable gains in 2016.

“Last year, we talked about [the market’s] being overvalued right throughout 2015 and said you can buy these stocks, but I kept saying, ‘Drag your feet, drag your feet.’ I’m no longer saying that,” he said. “We’ve now had a decline in stock prices, which is not a lot of fun, but we’ve declined to a level which, in my judgment, is about 10 percent undervalued, which puts the upside potential value by the end of the year up by 13 percent.”

The three major U.S. stock indexes built on Friday’s strong session, with the Dow Jones industrial average adding about 200 points, while the Nasdaq composite and the S&P 500 index gained 2.1 percent and 1.5 percent respectively.

But the indexes still remain down at least 7 percent in 2016 as well as in correction territory, or down more than 10 percent from their 52-week highs.

“The level of pessimism, especially among smaller investors, is extraordinarily widespread. When you get a market that is this undervalued, and you get a lot of pessimism, that’s a combination you rarely see.”

[Source:- CNBC]