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.











Reader Comments (Page 1 of 1)
3-05-2008 @ 10:35AM
Sheldon L said...
maybe even at $101 - ;-)
could be waiting a long time...
3-05-2008 @ 10:46AM
Dan L. said...
Wow you're just brilliant! I can't believe you figured this out! Genius! Absolute genius. Apple a buy at $100. Steve Jobs wants to hire you immediatley! Goldman Sach's Wants to hire you!
3-05-2008 @ 11:54AM
Doug said...
I concur with Dan L. Do you really get paid to tell people that a company that could make $6.38 in a year is a steal at $100 a share. Pull your head out. It's a great buy right now. I'll cross Babson College of my kids list of schools!
3-05-2008 @ 12:01PM
Boring Market said...
You're telling me that the stock is going to drop $25 in what time period? A week, a month, a year? I think if Apple's stock price drops $10-15 then we'll have a screaming buy and that is not going to happen for a couple of months. Do you realize the last time it was under $100 was before the iPhone, and before Apple's increasing market share? Peter, you take optimism to a new level.
www.boringmarket.com
3-05-2008 @ 12:13PM
Ed C. said...
Tell me, will GOOG be a buy at $100 too ?
You really know how to go out on a limb.
Thanks for the advice.
3-05-2008 @ 12:15PM
BILL said...
YOU TEACH MANAGEMENT? LUCKILY, NOT MONEY MANAGEMENT OR SECURITIES, I TRUST. LET US KNOW WHEN IT WOULD BE OKAY TO BUY APPLE AT 50 OR SO.
BILL
NAPLES
3-05-2008 @ 12:23PM
prabhata said...
AAPL has been holding steady around 120 (take a few points up or down). The question is why would the stock plummet to 100? That steep drop would be a drop in earnings or expected earnings. The p/e ratio would also change. Doh!
3-05-2008 @ 12:43PM
Beltway Greg said...
Okay Peter, the game is afoot. How about a little side bet regarding the price of Apple. You take $100 and I'll take $150.00. If it reaches $100 I pay you or make a donation to your favorite charity of $5K. If it reaches $150 before dropping to $100 you just show me the cash cause I ain't donating nothing to nobody. Do you folks get paid by the post? And while we're at it, Cramer's assertion that POT can reach $300+ is insane. If it reaches $300 I'll snort a ground-up aspirin off the back of a gorilla in the Bronx Zoo. If the aforementioned zoo does not contain a gorilla I'll travel to the nearest zoo which does contain a full sized male Silverback and commence to a snortin'.
Beltway Greg
3-05-2008 @ 1:10PM
Sheldon L said...
Greg, your sooooooooo hysterical!
...and my $150 to $160 this summer is looking quite reasonable wouldn't you say...
3-06-2008 @ 7:16AM
Beltway Greg said...
Sheldon, yes if they beat next earnings and we get a little nudge from Beneficent Ben we're at $150 in a flash. So I hate to agree but I must. BTW, I've lowered my target to $259.00 because of all of those unlocked IPhones. What a dumb bit of analysis. If they didn't unlock the phone they wouldn't have bought the thing in the first place and try this one on for size.....Steve & Co. actually knew that some would be unlocked. You know what? I think Apple should consider the generic IPhone for people who aren't into status symbols. Perhaps they could call it the pineapple.
Beltway Greg
3-05-2008 @ 9:45PM
Sheldon L said...
Greg,
Considering who the hackers are would you not prefer to call it the "crab apple"