Unfairly Punished Apple Still Fresh

| About: Apple Inc. (AAPL)

Apple Inc. stock (NASDAQ:AAPL) is starting to look attractive. The share price has come down significantly, valuation is more appealing, international Mac sales are accelerating, iPod sales remain strong, and the iPhone presents a significant growth opportunity.

Apple currently trades at around 27 times 2008 earnings estimates, which is well within their historical range of 23 to 39 times, and down significantly from the beginning of the year (Apple's stock price is down around 30% year-to-date while the Nasdaq is down less than 15%).

Apple's recent decline is largely due to lower-than-expected earnings guidance from management at their last conference call, and the general fear that a slowing economy will reduce spending on luxury items such as iPods and iPhones. Also interesting to note, Apple historically underperforms the market during the first half of the calendar year. Further, Apple was trading at a hefty premium and, in my opinion, was due for a correction.

International sales of Mac notebooks and desktops have been accelerating. In 2007, Mac grew unit sales by 45% in Europe, 60% in Asia-Pacific, and 30% in Japan. While Apple still generates 60% of total sales in the Americas, the non-traditional geographies accelerating growth is an encouraging sign (for reference, Apple generates about half its total revenue from Macintosh notebooks/desktops and half from iPod/iTunes).

Besides growing Mac notebook/desktop sales, Apple has other growth opportunities. Most notably, iPhones are expected to begin contributing significantly to Apple's revenues in fiscal year 2008 (iPhone sales should be around 6% of total revenues). Additionally, Apple's SDK and third party applications will add functionality to the iPhone and create more awareness and demand. Also, the maturing iPod industry will continue to generate strong revenues via higher-end iPods, replacement iPods, and video capability (80% of new iPod sales in fiscal year 2007 had video capabilities). Further, Apple has big plans for "AppleTV."

Overall, I believe investors have unfairly punished Apple due to lower than expected management earnings guidance and a jittery stock market. Apple historically provides conservative earnings guidance (they crushed analyst expectations every quarter last year), and they are still forecasting a sharp increase in revenue growth. It's surprising to me that Apple's stock has fallen as far as it has.

Disclosure: I do not own shares in Apple.