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Will Apple be a buy at $100?

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With its stock down 38.6% from its December 2007 high of $202.96, I think Apple Inc. (NASDAQ: AAPL) will be a buy if it hits $100.

Since Fortune, which shares parent Time Warner (NYSE: TWX) with BloggingStocks, reports that Apple was voted the most admired company of 2007, I wonder whether it's suffering from the curse of being on a magazine cover -- with that appearance marking its peak. Or will Steve Jobs pull another rabbit out of his hat that revives the company and the stock?

With Apple's stock down 38.6% from its December high, the question is whether the stock is now a buy? Back then I suggested that it might be overvalued. Now that it's down, I think it's fairly valued on the same basis -- its Price/Earnings to Growth (PEG) ratio has declined from 1.8 to 1.1. Specifically, Apple sports a much more reasonable PEG of 1.1 -- with a P/E of 27.4 and earnings forecast to grow 24.6% in 2009 to $6.38.

If Apple stock hits $100 -- and those earnings growth forecasts remain the same or even rise with a new product announcement -- it would become a screaming buy.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Last updated: November 09, 2009: 12:28 AM

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