When is Apple Cheap?

Shares of Apple (NASDAQ: AAPL) dropped about 10 percent early on Thursday after the company reported a disappointing quarter Wednesday night.

Although Apple's EPS came in slightly better than expected, revenue missed, and iPhone sales were lower than the key 50 million unit mark analysts were looking for.

Most significantly, Apple said it was changing the way it did guidance, planning to give more realistic guidance going forward -- in the past, Apple guidance had almost always been absurdly conservative.

As a result, most analysts cut their price targets on Apple, and a few downgraded the company.

Jeff Gundlach, known for his fixed-income investing but also a big Apple bear, said that shares of Apple wouldn't be cheap until they entered the $300 territory.

“There's still an obsession with [Apple], 'Do I buy it now that it's down a little bit?'...this is not the type of talk that goes on at a really enduring bottom,” Gundlach told CNBC viewers Wednesday evening.

Gundlach said to watch the $483 level Thursday. If Apple closes below $483 on Thursday, he expects it to be $425 very quickly. With Apple near $460 early Thursday, it seems highly likely that it will close below $483.

Even if it gets to $425 though, Gundlach still doesn't believe it will be cheap. “Since when do broken stocks stop at fair value?” he asked.

Still, when looking at Apple's fundamentals, the stock appears cheap. Apple's trailing PE is only 10.47; its forward P/E is 8.19. Compare this to Microsoft (NASDAQ: MSFT): trailing PE of 15.12, forward P/E 8.80.

Shares of Apple traded at $464 on Thursday.