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You just have to laugh at price targets. Investors love them, so analysts and "experts" keep using them. I think they are dangerous - even though they are long-term in nature, they influence people's short-term expectations. When I wrote this article about Solarfun (NASDAQ: SOLF), I predicted further strength ahead, but I didn't know the stock would break out to all-time highs. Even though it did, I would've written the article exactly the same, because my only aim was to predict the overall price trend.

So when I see a $300 price target gets slapped onto Apple (NASDAQ: AAPL) here and here, I become determined to wave a caution flag instead of being yet another cheerleader. Which brings me to why I think buying this stock is becoming increasingly dangerous - cheerleading. Cramer, Yared, Smith, Johnson, Williams, Jones and Brown (two commentators and the five most common last names) love the story - the new products, the developing product cycle, the margins, the potential for growth, blah blah blah. Everybody is so incredibly comfortable in assuming that business performance is directly related to stock performance. I think there's a correlation, but it's not as high as everyone believes - incredibly well managed General Electric (NYSE: GE), whose stock was up an astounding 0.37% in 2007 comes to mind. So, I'd like you to consider a different variable - expectations. And expectations for Apple are already sky-high.

To a cynical guy like me, Apple's story seems too perfect, and it's been my experience that when everyone gets this excited about a stock that has decupled (10 times) within four years, caution is warranted. Mainly because if this company disappoints in any way, these cheerleaders could turn faster than a Spears' sibling when she's fertile.

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Apple (AAPL): Bring on some caution originally appeared on BloggingStocks on Thu, 03 Jan 2008 10:48:00 EST. Please see our terms for use of feeds.

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