Apple: Though Tempted, I Wouldn't Bite Just Yet

I have to admit that shares of Apple (AAPL) are starting to look attractive. The stock has come down a lot, but this is still an incredibly strong business. I think investors are getting understandably nervous about this holiday season.

The company said to expect Q4 earnings (ending September 30) of $1 a share. However, the company always lowballs its forecasts so it can say that it beat forecasts. My quick guess is that Apple will probably report about $1.15 to $1.20 a share.

The concern is that Apple will come out with a lousy forecast for 2009, and the market will think that it’s not lowballing. Even if the company only grows its earnings-per-share by a little bit, the current price won’t be a bad entry price. I wouldn't bite just yet, but an $80 share price would be hard to ignore.

Disclosure: None

Comments

[Murphy Mac:]

Hard to argue with this one. I thought aapl would find its bottom around $120, so now it's not hard to picture 80. Recent history suggests you're dead-on with regard to the next forecast and the street's reaction.

That said, when is Wall Street going to recognize that quarter after quarter of growth is not a fluke? Over the next few years Apple is going to invade more and more homes, eating into MS. It doesn't seem like the market can ignore the undeniable upside to aapl - but it's exactly what they've been doing.

2008 Oct 03 08:03 AM

[Roger Knights:]

The most likely reason for most of the very sharp recent decline is Wall Street Whispers about Steve Jobs's health. It was predicted in <i>Forbes</i&... back when the stock was about 165, that a resignation announcement by Jobs would trim 1/3 from the stock's price. Now that bad news has been almost entirely discounted. If such an announcement is made, it would be a great time to buy, following the precept "Buy [or sell] on the rumor, sell [or buy] on the news."

2008 Oct 03 08:20 AM

[turkeyeyes:]

Shorts and bashers have manipulated the piss out of this stock via lies and innuendo.

A shame.

2008 Oct 03 08:24 AM

[Vox Rationalis:]

I think it's getting very hard for the naysayers to continue their arguments. I call bottom.

But what the hell do I know, I'm just your average iPhone addict. But I'm a PC, too.

2008 Oct 03 08:26 AM

[Roger Knights:]

PS: As I've said in other comments here, Apple doesn't have to outrun the bear, it only has to outrun Windows. It is not much threatened by a decline in overall micrcomputer sales, because its share of the pie is increasing so rapidly.

Wouldn't it be wild if some far-seeing investor recognized the long-term Value of Apple (e.g., a price of 1000 in 10 years, IMO) and plunked down some major change? Warren Buffet, perhaps? that would turn analysts' heads around in a hurry!

2008 Oct 03 08:27 AM

[Murphy Mac:]

Roger - it boggles my mind that someone like Buffet has NOT seen the light here. And what about all the analysts with price targets of $200+? Don't their own institutions buy big on their advice?

In 1990 I knew Intel was going to be huge, but I didn't have any money. I'm not going to miss out on aapl.

2008 Oct 03 08:35 AM

[brewer:]

I think this is the bottom as well. Put it this way, if the bill passes today, you won't buy them any cheaper than 103 from the look of it now. It will bounce back up today on open, and the rest of the day unless some dire news comes from Washington, simply because it was oversold yesterday. Better buy quickly once that bill is passed, and the market starts to rally.

I don't think you will ever see 80.

2008 Oct 03 08:46 AM

[Toni +:]

80 attractive? I found AAPL attractive at 120.

Just like any other person out there 30 days ago, just like any analyst who started to downgrade fearing to be wrong with the higher target.

The downgrades were only caused by fear, not reasoning.

JW, Phd is still a loser, BTW.

2008 Oct 03 09:12 AM

[uncle:]

$80 share price less $25 cash/share would give you a $55 stock. If this should happen I would think the DOW would have to have lost another 2000 points. Possible, but I just don't see that scenario right now. If the bill is passed in congress soon I think we will be a lot closer than that to a bottom.

2008 Oct 03 09:15 AM

[turkeyeyes:]

Another Jobs health rumor (heart attack) just circulated by short f-ing liars.

2008 Oct 03 09:58 AM

[Apple at 60$:]

yea and also they cant short sell financials due to the ban so they all pick on Apple.

2008 Oct 03 11:10 AM

[Urbane Gori...:]

turkeyeyes.... According to shortsqueeze.com, the short float is only 2.95% ... That's nothing. I think I'd be inclined to **blame** hedge funds cashing out for all the reasons that have already been mentioned.

jegan '-)

2008 Oct 03 10:44 PM

[najdorf:]

Maybe some of you are younger than me and don't remember the bad days of Apple, or maybe some of you are older and only started seeing tech stocks as serious businesses after the tech crash established reasonable valuations. In any case, I think a lot of people ignore one of the biggest factors holding AAPL stock down, which is that those who predicted the continued domination of Windows machines have been right for the last 20 years. My first computer was an Apple II GS, but you have to admit that Apple didn't do a very good job of marketing and price competition in the following years. Now, I agree with most of you that AAPL is great at these prices (though I have to laugh at anyone who bought it above $150). But when you talk about Apple's growing market share, cool brand image, etc. to a general audience of potential American stockbuyers, you're talking to a lot of people who successfully ignored Apple throughout the late 80s and all of the 90s, who have been pestered by Mac users for 20 years, and who don't really find overpriced gadgets cool.

You're talking about a company that's really a consumer company for those who want the latest and hottest: any Apple product has much cheaper competition that does the same essential functions (admittedly without so many cool features, attractive design, and brand image - but in tough times price and function come first). Do you really think that consumers will be able to afford the price premium in the environment of the next few years? I'm not talking about dedicated Mac users; I'm talking about the marginal Apple product buyer who fuels growth. In the long run Apple is almost certainly worth more than today's price (like almost every stock), but a really bad earnings announcement could be painful for a company that has so many excited momentum-driven investors. The price decline is marking both the general market problems and the particular risk for Apple of that possibility.

2008 Oct 04 10:42 PM

[the Graduate:]

najdorf - thanks for some thoughtful, literate analysis to wash away the bad taste of some of the more juvenile rantings to be found on this site.

2008 Oct 05 12:03 PM