There are few topics as popular on BloggingStocks as Apple Inc. (NASDAQ: AAPL), one of the original eight we focused on. In the past 52 weeks, the stock has fallen from a high of $202.96 to a recent low of $79.14 amid the greatest market turmoil in 80 years.
Everyone has finally agreed that we are in the midst of a severe recession, and Wall Street has punished Apple, the inventive high flying growth story, because of fears that a slowdown in consumer spending will stall its market expansion.
Black Fridays promise aside, the market is in a wait and see mode. In the meantime, after five consecutive trading days in the upward direction, Apples shares closed Friday in a shortened trading day at $92.67, down for the day but notably off its earlier lows.
A sixth up day was too much to hope for as the market is down, and Apple hit a Monday low of $89.00
So what now? Is the growth story over? I think that for those who have an interest in owning this stock, now is the time to buy. Given a P/E of 17 and a reported $27 in cash and no debt, could there be a better time? I think not.
Steve Jobs, the inspirational leader of Apple and a generation of young entrepreneurs, has had health problems in the past and the concern seems to pop up now and again, but the company moves forward with a solid foundation of products. Apple's iPod is a powerful presence in the music industry, while its iPhone is the most popular and influential phone of the past few years. Its line of computers has gained market share quarter after quarter for several years and there is room to extend that growth as well.
Interestingly, many analysts have placed widely ranging 12 month prices on Apple stock, from $130 to $240. There must be a disconnect somewhere because if they actually believe this then why is the stock languishing? If the analysts believe what they are stating then you would think the stock would be moving higher. But alas, Wall Street credibility may be worth less than the overall market and Apple stock even at these depressed levels.
However, if you are interested in Apple stock, when should you buy if not now?
UPDATE: Today's closing price: $88.93, down -$3.74, or -4.04%
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.
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Reader Comments (Page 1 of 1)
12-01-2008 @ 4:35PM
JBoeck said...
I'm in again.
Lets rise those stocks.
12-01-2008 @ 4:42PM
Sheldon L said...
...and what are your reasons JB?
12-01-2008 @ 4:58PM
Dan Barnett said...
Sheldon,
Given that earlier today one of your colleagues posted about his Apple Customer Service problems; I'd be reluctant to get in right now.
Right now I contend that Customer Service is probably the most important factor in retail or manufacturing companies.
12-01-2008 @ 5:18PM
yet another steve said...
And... the PE is misleading. Subscription accounting for iPhone (which is becoming a major part of its business) is hiding a lot of profits. While Apple's reading of GAAP is that it needs to use subscription accounting, it does not reflect its business performance. The costs of providing free software updates is essentially zero (Apple would invest the R&D to improve the iPhone OS anyway in order to sell new ones.). If you account for the iPhone like it was a mac or an iPod, profits almost DOUBLE.
Or if you stick to GAAP, this is guaranteed profit for the next 7 quarters.
If there's any doubt these profits are "real"... well look at the cash. It is growing (with zero debt) at the rate of AAPL's "non-GAAP" earnings.
I haven't done the exact math, but we are approaching a SINGLE DIGIT PE.
This isn't a EBITDA game. Apple's "non-GAAP" earnings reflect its balance sheet changes (swelling cash with no debt).
Yes, Apple who lowballs its projections every quarter is also lowballing its GAAP PE.
And Apple doesn't care because they have $25 B in the bank, no debt, growing market share, and know the deferred earnings will hit the GAAP bottom line eventually, while they already have the cash.
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There's another factor here too... while much is made of how a global economic slowdown will hurt Apple's growth... what about the effect it will have on Apple's margins. Because Apple is better at holding its prices than its rivals, soft commodity prices can really swell its margins.
More earnings, and more cash.
This company prints money almost like Microsoft, and is still a growth story (this is still the BEGINNING of the iPhone story, which is going to have the most vibrant 3rd party application support since the PC).
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Now please go out and short AAPL. I don't mind paying less.
12-02-2008 @ 9:04PM
Mr. noitall said...
Well, I wouldn't buy it now. Even if the company does well,(as they have been), I think the stock will continue to go down, or just be dead money for a long time. Maybe if you trade in and out of the stock you can make some money, but why bother. Hey, some said it was going to $300, you said it might be a buy at $150. Even my pessimistic prediction of $115 or $105 by the end of the year, was too high. I say, Apple has had it's day, it's time to move on.
12-02-2008 @ 9:08PM
Mr. noitall said...
Oh, sorry, I checked my prediction I said Apple would be aroud $120 by the end of the year, I was too optimistic.