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Apple ($AAPL) Getting Absolutely Killed..Now What?

December 17, 2012 | About:


It’s no secret, I’ve been a huge believer in Apple, both the company and its stock. As you can imagine the stock getting crushed has not been good for me. Not only am I long the stock but it was also one of my 4 stock picks in the yearly stock picking competition. As you can imagine, my performance has declined. Just take a look at this chart:

AAPL1.png

Brutal, brutal, brutal….

Let’s Not Lose The Context

It becomes so easy with the information overload to think that Apple is in big trouble, crashing quickly, etc. Let’s look at a longer term chart

AAPL2.png

Suddenly, it doesn’t look as bad does it? Just last week, Apple declined after UBS downgraded Apple, changing its price target to $700 (from $780). More is expected today after a downgrade by Citi during the weekend. That’s still pretty darn high isn’t it? It would be a return of over 25% in the next year.

Is Apple Still A Bargain?

Let’s take a look at some numbers:



TickerNamePriceEPSPE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBeta
AAPLApple Inc509.79444.6411.999.0931.9744.584.63125.861.01
So basically, Apple is trading at a P/E of 10.7, forward P/E of 9.1, has returned 32% this year… sales are growing at nearly 50%.. it doesn’t seem as dramatic right? So why is everyone selling? Fears that the iPhone5 and iPad minis are not selling as well as they had hoped seem overblown, Honestly, Apple still has dominant products, has an Apple TV in the pipeline, continues to dominate in the sales of digital products such as music and apps.

To give you an idea, that is almost exactly Microsoft’s (MSFT) P/E ratio..except that Microsoft is growing 8 to 9 times more slowly…

So really, I continue to believe in Apple’s growth story, and its in stock.. how about you?

Disclaimer: Long Apple (AAPL)


Rating: 4.2/5 (9 votes)

Comments

docsbp
Docsbp - 1 year ago
I would like to see a comparison of charts of Apple and other tech titans, showing a modified PEG ratio where price is replaced by enterprise value per share. I believe such charts would be more useful than any of the charts we usually see.
adamcz
Adamcz - 1 year ago
To me P/E is an irrelevant metric for Apple, because it's so difficult to say what the "E" will be several years from now. Two years ago Apple was earning $15 per share, and I'm meant to believe that $50 is the "now and forever" baseline? Apple may very well dominate OS usage over the next 10 years, but then again, they might not. Google's strategy of giving it away for free to grab market share seems to be working very well for them. Microsoft has a couple very powerful cards up their sleeve.

As a consumer I'm excited to follow this battle, but as an investor, there are easier stocks to choose from.
pcgeekus
Pcgeekus - 1 year ago


I'd guess some of this is fical Cliff selling and AAPL will get on track in January. It appears it is not

done going down and may fall as far as $400. Whatever it is, I'd buy before year end.

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