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NDQ:AAPL 2:30 PM EST price: $82.75
Could this be another example of our economy’s “Jobless Benefits”?
The news of Steve Jobs medical condition sent the shares of Apple tumbling after hours yesterday and in today’s regular session. AAPL shares have traded in a 52-week range of $79.14 - $192.24.
As of September 27, 2008 the company held almost $25 billion in cash or about $27 - $28 /share with no debt at all. Deduct $27 from the current quote and the business itself is selling for $55.75 /share. With trailing earnings of $5.36 for the FY ended last September that means AAPL shares are just over 10x operating earnings if you factor out their cash.
Worried about the “Jobs Report?”
Take a longer term view out to January of 2011 and sell a put or two at lower than today’s price.
Strike ….………..… Bid ……… Net Cost if Exercised
$60 ……………… $13.00 …………….. $47.00
$70 ……………… $17.50 …………….. $52.50
$80 ……………… $22.80 …………….. $57.20
While nobody can assure you that Apple shares will not be below your net purchase prices from the above list I can tell you that their shares have not traded hands below $79 since 2006. Even in 2006 the absolute low was $50.20 and EPS for the 2006 FY (ended Sep. 2006) were $2.27 or just 42.4% of FY 2008’s final number.
Disclosure: Author sold AAPL puts today as described above.
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IMO you are very focussed on price. You see, AAPL around $ 50 would by definition be a bad investment.
I for one require considder any company a core holding as long as it meets all of the following requirements:
- Good and cheap management (BRK)
- Highly predictable and noncyclical earnings (HB)
- Barriers to entry built into the business (BNI)
- High gross and net margins (MCO)
- A rock solid balance sheet (ZINC)
- No new capital required for growth (KO)
- A small market share to start with (HMC)
Needless to say, I'm still looking for that one. If I find it or anythung that comes close, I would be willing to pay double digit normalised p/e.
Most stocks, at a low enough price would be a good investment. AAPL may be a great investment at $ 50; but what is it that so attracts you in AAPL as to considder it a core holding.
As I see it, the recommendation boils down to:
"This icon must be cheap at $ 50; the last time it traded that low, was a long time ago"