Apple shares, which were trading at $485.19 early Wednesday, are trading well below where they should, according to legendary money manager Bill Miller, manager of the Legg Mason Opportunity Trust.

"It just makes no sense for Apple to trade where it is: seven times enterprise value to free cash flow," he tells CNBC.

"If Apple was a junk bond it would trade 40 percent higher."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

Apple's stock is unlikely to double in the next one to two years, says Miller, whose fund has a stake in the company.

"[But] if it takes two years to get back to where it was a year ago, it's 50 percent" higher than current levels, he notes. The stock hit a record high of $705.07 Sept. 21, 2012.

While Apple shares have lost 31 percent of their value since then, prices can reverse rapidly, Miller says.

"Netflix was at $60, that was a year ago, and now it's $300. Best Buy was $13, now it's $38. The psychology can change quickly," he stresses.

When it comes to the stock market as a whole, Miller agrees with fellow investment icons Carl Icahn and Warren Buffett that it's now "roughly fairly valued."

Apple will need strong profits to drive a higher stock price, says Alex Gauna, an analyst at JMP Securities.

"To justify the valuation on the stock, it's got to get back to earnings growth," he tells Bloomberg. "They have to be always innovating and putting in place the mechanisms for growth, or it doesn't matter how much cash they return to shareholders."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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