Gadling is giving away free tickets to Amsterdam!

AOL Money & Finance

Chasing Value: Apple -- two rights and one wrong

Well, things played out as I thought and Apple, Inc (NASDAQ: AAPL) closed on Friday August 1, 2008 at a price of $156.66 and opened pennies down today. I will be the first one to admit that a few of my calls have been terrible, but this one was right on target.

Quoting from one of last years posts, "However, I thought Apple might be worth up to $150 and a month later was willing to consider $160 and that is where I stood." So I'm on record pegging the stock between $150 and $160. Having made the call on the money I will now tell the world that a lot of this game is luck, but that is all I thought it was worth.

Why two rights? One of our brighter commentors, Beltway Greg had pegged Apple around $200 a year out and it made the number in December 2007 long before even he thought it might and I gave him credit at the time. I was looking farther out and as the current price evidences I was correct also. But what's wrong with this picture? When I wrote, I tried to figure what I thought the stock was worth as did Greg.

The difference is he simply figured investors would be willing to pay a much higher multiple. For myself, I thought this story may be getting a little long in the tooth and the economy would have a lot of question marks.

Apple's P/E ratio has come down to about 30 which I think is still a tad high but I can live with it. However, Greg is looking for the stock to be $260 this December and there I think he is wrong. I think earnings will slow somewhat, as Apple itself has projected, and this time I do not think it is underplaying market expectations (so that it can then top them by a penny and still win). From my perspective Apple will remain under $200 this year and might add $10 to $15 from here but will not be worth much more.

My colleague Georges Yared was the biggest Apple bull I know last year, and looked smart to place that bet. However, he also got to excited about last year's success and posted that Apple will hit $300 this December, which pushed me to post Kiss of death: GOOG $2,000 & AAPL $300.

Apple is still making good money and the 3G iPhone is selling out. It is still back-ordered at our local AT&T Stores. Perhaps Apple even may introduce some great new products by year's end, in which case all bets are off. But for now I would not look for much more than Apple itself has projected.

UPDATE: Apple closed today at $153.23, down -3.43, (-2.19%)

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of AAPL.

Related Posts

Reader Comments (Page 1 of 1)

Add your comments

Please keep your comments relevant to this blog entry. Email addresses are never displayed, but they are required to confirm your comments.

When you enter your name and email address, you'll be sent a link to confirm your comment, and a password. To leave another comment, just use that password.

To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br /> tags.

Symbol Lookup
IndexesChangePrice

Last updated: October 12, 2008: 02:32 AM

BloggingStocks Exclusives

Hot Stocks

BloggingStocks Featured Video

TheFlyOnTheWall.com Headlines

WalletPop Headlines

AOL Business News

Latest from BloggingBuyouts

Sponsored Links

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance