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Who knows whether Apple (AAPL) is over- or underpriced - different investors can come to...

Who knows whether Apple (AAPL) is over- or underpriced - different investors can come to different valuations - but after the week it's had (down 6% in three days, and 10% off its high), maybe you should look at paring that position (and considering how much Apple moves major indexes, you may own a lot more than you think).
Comments (79)
  • Exactly wrong advise imo - sell your winners? Buy more on the dip; look at the price targets. You don't think AAPL will go to 700 this year? AAPL has a high PE and PEG?
    21 Apr 2012, 08:51 AM Reply Like
  • Hmmm.....p/e of 16 for one of the fastest growing most profitable companies on earth. Zero debt, now a dividend, etc.


    From yahoo...


    Trailing P/E (ttm, intraday): 16.31
    Forward P/E (fye Sep 24, 2013) 11.26
    PEG Ratio (5 yr expected) 0.69


    If you are making the case for overvalued as an example try PCLN. AAPL has a moat and pricing power too where PCLN will soon be replaced by multiple competitors including hotels, airlines, etc. that constantly continue to improve their websites.. Can you see anyone anytime soon replacing apple products? Seems like nobody has successfully entered tablet space vs. Apple. It is incredible phones are essentially becoming personal assistants, GPS, etc. and Apple makes the best and most dominant.


    I could be wrong but I am buying more AAPL as I think news has been particularly negative but the VALUE of AAPL has not changed much. For example e-books suit vs. AAPL is negligible on AAPL's bottom line. I mean really isn't e-books like 1/2000000000 of AAPL's bottom line?
    21 Apr 2012, 09:54 AM Reply Like
  • Everything you say is built in....what's not is what we don't know.


    Why the risk?


    I took profits and will wait this one out-----extending when you have a great return....may turn into a way to give some back....


    That would be silly.


    Good trading
    21 Apr 2012, 03:38 PM Reply Like
  • Sold at $618, bought at $575.
    21 Apr 2012, 09:55 AM Reply Like
  • Listen folks! What the careful analysts are saying may be summarized as follows: the carriers won't pay Apple so much money as to reduce cost to the customers and consequently the gross margin will decrease and the eps will not continue the trend of the past. In other words profitability of Apple will be a thing of the past, Apple will become Microsoft.. Second, Samsung will displace Apple as king of the hill, period and Apple will become Nokia. I gleaned these two concerns from whatever led to the decline of Apple from $640. to $572 ( $ 68 ) and I don't see how a reduction of $68 out $640 is a 10% correction ( my calculation shows it to be 68/640=10.6%). Some people looking at chart are for a pull back to $555 or beyond! So, may be we listen to the naysayers and watch our backs!
    21 Apr 2012, 09:57 AM Reply Like
  • This all became news in the last 2 weeks? Every quarter people obsess over compressing margins and the margins keep expanding. Same old tune. Get back to us on Wednesday.
    21 Apr 2012, 10:56 AM Reply Like
  • You've GOT to be kidding me! Nokia???
    21 Apr 2012, 01:21 PM Reply Like
  • Fact... Apple produces products that the most people in the world want. When was the last time there was a stamped for a new Nokia phone? Fact... It's been proven that once consumers insert themselves into the Aplle "eco-system" they purchase additional Apple products and when they upgrade, they stick with Apple products. Fact... Apple is only now beginning to penetrate the business arena by having large companies (like GE) accept Apple as an alternative to Intel based workstations. Fact... Apple still only comprises about 8% of the total smart phone base in the world. Assumption... Does anyone, given past performance, think that when Apple introduces their new TV system later this year that it will not be another catalyst for additional profit growth? Anyone???


    Will Apple report another great quarter on Tuesday? Maybe? But to me, deciding what to do based on Tuesday's number is incredibly shortsighted. Buying Apple stock is an investment - not a trade. Because this story shows absolutely no long term price degradation.


    Long AAPL and probably will buy more under $550
    21 Apr 2012, 02:01 PM Reply Like
  • People have shorts memories. This happens every single year. Apple drops for no particular reason and all of the experts make up reasons after the fact (this fallacy is called Post Hoc Rationalization).


    And apple stays down for a few weeks, everyone panics, then it proceeds to new highs.


    Every year.




    Long apple.
    21 Apr 2012, 05:02 PM Reply Like
  • Thanks, excellent point..... Someone should study the amnesia of the naysayers...
    21 Apr 2012, 08:40 PM Reply Like
  • WisPokerGuy, Well said.


    Looking at the FACTS:


    AAPL went up from 420 to 644 because
    1. People expected another blowout 2Q12 --- not necessarily as good as 1Q 12, but similar earnings growth over 2Q11
    2. People expected a blowout 2012 Annual growth over 2011


    Then, AAPL dropped from 644 to 558
    1. NOT because of fundamentals.


    AAPL dropped from 644 to 563 because
    1. VZ (holy smokes, if everybody else dropped the same amount, and China didn't .....)
    2. Ensuing Panic selling


    Now lets look at the facts:
    1. AAPL has NEVER come in under guidance.
    2. AAPL has ONLY issed the most optimistic comments about their prospects.
    3. AAPL announced a dividend and a stock buy back.
    4. Subsequent to the VZ earnings, analysts have been predicting 2Q earnings to come in significantly below earnings.


    Now. If AAPL was to come in BELOW guidance, don't u think they have to warn ahead of time, or risk being sued?
    23 Apr 2012, 11:04 AM Reply Like
  • Above or below guidance is irrelevant. The stock is over priced no matter how you look at it. Mid $400's is where it should be, and it is headed there as we speak.
    23 Apr 2012, 11:36 AM Reply Like
  • Science Guy,


    Irrelevant? Mid 400s? Ur scientific acumen is truly amazing. If u really believe that to be true, you should buy AAPL Puts, and just hang on to them until AAPL drops to that price.


    Or are u even in the market?
    23 Apr 2012, 12:50 PM Reply Like
  • Hard to believe this is good advice


    I don't own it but do not see it as overpriced and am considering to buy in here. The only issue I had with them was their lousy cash allocation strategy.


    It is strange - if they split 10 for 1 then suddenly I bet everyone who thinks it is expensive would believe it was cheap again


    The price is an optical illusion it is a classic expample of mass System 1 thinking. (if you don't know what I mean read Thinking fast and slow by Kahnemann)


    21 Apr 2012, 09:59 AM Reply Like
  • You are correct Econdoc.


    Ignoring the chart and focus on the fundamentals, one would realize AAPL isn't overpriced. People who use charts to trade AAPL miss the basic math since they are to lazy to use Kahneman's "System 2" thinking.


    AAPL's ecosystem and international opportunities are under appreciated. Applying a low 12x P/E to conservative $50 calendar 2013 EPS and adding excess after-tax EOY'12 cash of about $45 gives you a year end $645, which is 13% above the current $573.


    Potentially, you could see 37% upside to $786 (13x $57 C2013 EPS + excess a/t cash), but I use the more conservative $645 price target to determine buy points.


    Hopefully "system 1" thinking will persist before earnings to give "system 2" thinkers another opportunity to buy AAPL.


    "Turning a stock chart upside down tells me the exact same thing - nothing"
    - Warren Buffett
    21 Apr 2012, 04:37 PM Reply Like
  • Thinking fast and slow by Kahnemann - thx for recommending - ordered a copy
    22 Apr 2012, 07:29 AM Reply Like
  • Instead of share price look at market cap or enterprise value and the illusion disappears. Splits have no meaning. AAPL is a stock that, even after last week's sell off, is still up over 40% since the beginning of the year; has the highest market cap of any company on earth; and might face some compression of profit margins going forward. It could see a price correction, even without major news. In order to raise cash for any reason trimming an overweight position in AAPL would make sense.
    22 Apr 2012, 10:20 AM Reply Like
  • We are long AAPL a long time AAPL is projected to earn $12.99
    +20% growth per year X 4 quarters per year on a $570 Stock gives you a forward PE of UNDER 10 best in large cap tech plus we got back a nice dividend. Pullbacks of 10-15% are healthy rest periods we bought some at $572 last week and will not sell irrational fear
    only failure of fundamental analysis.On average the Braeburn Group Index participants anticipate the following revenue, expense and eps results:Revenue 43,543,517,467 76.53% YOY GrowthGross Margin 19,450,959,577 44.67% of Revenue
    OpEx -3,309,360,667 7.60% of Revenue
    OI&E 150,466,667Pre-Tax Income 16,292,065,577 37.42% of Revenue
    Tax Expense -4,040,929,363 24.80% Tax Rate
    Net Income 12,251,136,214 28.14% of Revenue
    Unless these figures change materially big pullbacks are always buys for us.
    Last had one last September bought it and did well.We have noticed big trading pools
    trying to shake the weak hands out projected before blockbuster earnings to get a great entry.EPS 12.99 102.97% YOY Growth projected.This is not a broken stock APD
    21 Apr 2012, 10:30 AM Reply Like
  • Thanks for the insight, Remurray. Your posts are always appreciated.
    23 Apr 2012, 12:10 AM Reply Like
  • A goog stock is a one where you have the grit to hold on to it even when it is don 10 %. I cannot find a better stock than AAPL for this usecase
    21 Apr 2012, 10:43 AM Reply Like
  • Everyone has a theory on the so-called Apple correction or sell-off. The only one that makes sense to me, given that we're coming up on earnings, is that it's been deliberately pulled back by multiple hedge funds in planned tradings. Watching the rather decisive moves downwards 15 minutes into trading over several days in the last few weeks isn't the result of some guy holding 50 shares deciding to sell at 9:45, it's aggressive selling by institutions. The stock was on a massive, seemingly unstoppable several months move upwards into the 640s and suddenly it does an about face 2 weeks before earnings? I don't buy the conventional wisdom. I think it's been an orchestrated pullback. Apple almost certainly will beat consensus on Tuesday and there's a reasonable possibility that the beat will be huge. If that happens, look out above.
    21 Apr 2012, 10:48 AM Reply Like
  • Yeah. See the pattern, when the price was depressed before last quarter's release, hedge funds bought to hedge, in another word, the price rose to 420ish. When now the price is higher, they sell to hedge. All long term investors should care less for them because you must have experienced similars when the price was in 200, 300 or even 400.
    21 Apr 2012, 11:55 AM Reply Like
  • Profit taking heading into earnings. Thats all
    21 Apr 2012, 11:38 PM Reply Like
  • No. I think there's much more to it than that. It appears that it will be trending down for some time.
    22 Apr 2012, 12:18 AM Reply Like
  • I also think the bottom has not been reached. Today's earnings will be interesting, but I suspect a continued drop is in order, even if it briefly goes up after the report.
    24 Apr 2012, 10:14 AM Reply Like
  • No matter what happens after the bell today, Apple will be dropping within a short period of time to the mid $400's. Count on it!
    24 Apr 2012, 11:33 AM Reply Like
  • android is the emerging force, appl is yesterdays news, in its creator is dead, the rest is just cheereading from hedge funds and dumb money, also some central bankers pushed the ball, but is ilegal so they are stepping out. Most of appl profits are overseas, so no way they can make any acquisition in the USA without paying serious taxes, betrer if you loock somewhere else. Appl products are too expensive in developing countries, Europe is collapsing so thats it.
    21 Apr 2012, 10:50 AM Reply Like
  • Your handle says it all.
    21 Apr 2012, 11:23 AM Reply Like
  • Where is the unlike button when you need it most? I heard google makes $1.70 for every android phone they sell.
    21 Apr 2012, 12:53 PM Reply Like
  • Three years ago, RIMM was going to nip Apple's progress into smart phones because they controled the enterprise market? How did that work out for RIMM? A year ago, Nokia was going to kill Apple in emerging markets by flooding the world with cheap phones. How did that work out for Nokia? Last September, people were terrified that Apple would lose it's focus because Steve Jobs wasn't around anymore. How did that work out if you sold after the October quarter? Last January, people were terrified that Apple would lose market share to Android, so many shorted the stock before earnings. How did that work out for the short sellers (Anyone know who Steve Cortes is?) ?


    Does anyone see a pattern here? It's always the easiest thing for people to say "the sky is falling" because they only have to be right once to then say "see... I told you so". Apple is the "big dog" in tech and because of that you always have people trying to take shots at what is CURRNTLY the single greatest manufacturer of ANYTHING in the United States - if not the entire world. Just focus on P/E, future growth and forthcoming product releases and you'll know what to do.


    Just my .02
    21 Apr 2012, 02:15 PM Reply Like
  • I'm willing to bet a couple of Chinese citizens would happily pay for apple products. ok,, more than a couple.
    21 Apr 2012, 03:49 PM Reply Like
  • (MSFT) makes money on every android sold. GOOGLE only makes money from ads on mobile devices.
    21 Apr 2012, 04:25 PM Reply Like
  • WisPoker: see my comment above, which mirrors yours. People have no memory when it comes to Apple.


    And this obsession with the price as a wrong number makes no sense. People panicked when Berkshire Hathaway broke $1000 a share, gave every reason in the book as to why it would revert to the mean. It is now $120,000 a share. There is no "right" number. Just go on the fundamentals.
    21 Apr 2012, 05:08 PM Reply Like
  • I agree.
    22 Apr 2012, 12:22 AM Reply Like
  • Sell while the price dropped, I bet the author would also say buy when it rises. This is the correct way to lose money.
    21 Apr 2012, 11:48 AM Reply Like
  • Exactly. Price is down so SELL!??? Ridiculous. Please, people, calm down and remember the investing basics.
    21 Apr 2012, 05:09 PM Reply Like
  • Exactly. The basics say that Apple is quite a bit too high right now. The fall will continue through the earnings report and or a few months afterwards. Only at that time will be smart to buy back in and go long.
    22 Apr 2012, 12:24 AM Reply Like
  • Put your money where your mouth is. I assume you are short Apple? Ill see you after earnings! (:
    22 Apr 2012, 06:21 PM Reply Like
  • I am not short Apple. I sold a while back, and am now waiting until it drops below $500 before I buy back in. Likely I will wait for the mid $400's. Shouldn't be much more than a month away.
    23 Apr 2012, 06:22 AM Reply Like
  • I suffered through all of Mad Money Cramer's show yesterday waiting for the word "Apple". Finally in the last 30 seconds he committed by saying "Apple is not a short term trade [of which I am a short term guy]. It is long term - keep after it". So for now I am holding on. I had made over 10% but now down to minimal gains. But lets see what Tuesday brings.
    21 Apr 2012, 12:06 PM Reply Like
  • Every time I listen t Cramer, I lose money. Every time. No mas...
    21 Apr 2012, 08:42 PM Reply Like
  • I've had AAPL in my portfolio since 2008 (<$90). This pullback is in response to the DOJ suit, and will pass; AAPL has huge cash reserves to settle. The fundamentals of Apple seem just as sound as they were two weeks ago. Buying and selling based on technical analyses and guesses is not the smart way to make money.
    21 Apr 2012, 12:40 PM Reply Like
  • This has nothing to do with DOJ or Heatgate or Verizon non-sense. It's the big fund managers manipulating the stock right before earnings. I know, hard to believe it happens...but it does, every quarter.
    21 Apr 2012, 03:51 PM Reply Like
  • Indeed.. I am certain of this.
    21 Apr 2012, 08:43 PM Reply Like
  • Apple is a great company, and no matter what it does in the next few months, going long now is never an issue. It will eventually pay off. In the short term, it may drop some more, but in the long term, that won't matter (except you can increase your holdings).
    21 Apr 2012, 01:18 PM Reply Like
  • sell strangles and let the market decide for that theta !
    21 Apr 2012, 01:19 PM Reply Like
  • Paring? After seeing it manipulated down consider adding.
    21 Apr 2012, 01:31 PM Reply Like
  • you pare your position if you are a trader with doubt. You keep your position long or short if you are an investor with conviction or a short seller with conviction.
    21 Apr 2012, 01:31 PM Reply Like
  • I thought the idea was to buy low and sell high. With Apple down 10% in the last couple of weeks, does it make sense now to "pare" your position ? Yes it can be gut wrenching to be in the stock through earnings, but after 10% down, selling low in hope/anticipation of lower has it's own risks.
    21 Apr 2012, 03:00 PM Reply Like
  • Try looking at the YTD (+40%) numbers and then ask whether you are selling at a low or high. In fact anyone looking at a long term chart of AAPL and saying that selling at $575 is low...
    22 Apr 2012, 10:29 AM Reply Like
  • Why do all of these articles focus on the 12% off of the high in the last 2 weeks rather than the 60% increase (which includes the 12% off of the high) over the last 5 months? My money is on the trend of 5 months rather than the rather fishy sell-off heading into earnings. People were falling all over themselves 2 weeks ago to buy Apple shares and all of a sudden the company's in trouble? I just came out of an Apple store which was jammed like a can of sardines w/ customers.
    21 Apr 2012, 04:32 PM Reply Like
  • Here's my thinking: I made 40% over the last few months and have now given back 10%.


    So I'm a net 30% to the plus side and the p/e has compressed.


    Now why would I sell?
    22 Apr 2012, 10:35 AM Reply Like
  • Rose, the PE will compress even more after Tuesday night.
    22 Apr 2012, 12:33 PM Reply Like
  • madness1089 - is that a prediction of disappointing earning announcement ? Or are you saying that regardless of what is announced, the selloff will continue ? You see no possibility of upside surprise tuesday ?
    22 Apr 2012, 07:53 PM Reply Like
  • danf I'm saying that because of SOLID earnings on tues, the PE ratio will go down, regardless of what happens to the stock price due to great growth in earnings. AAPL price just really isnt keeping up with its earnings growth.


    That being said, I think that AAPL will beat Wall Street consensus of 10.00 EPS. By how much is the magic question- everyone is pretty much anticipating a slam dunk earnings report.


    Is there room for upside potential on Tues? Definitely. But I do think its possible that the selloff could continue if Apple reports earnings of lets say 10.15/share. I mean that is fantastic YOY growth but I really dont think it will be enough to satisfy.


    Personally, I think it will be a nonissue and EPS of at least 11.50+ will be reported, but the only people who know for sure what AAPL's going to report are Cook and Oppenheimer. All we can do is guess.
    22 Apr 2012, 08:16 PM Reply Like
  • Apple really gets under the skin of conventional people. Jobs would get a kick out of that.


    Long Apple and buying more Monday. And then Weds. And when it hits a PE of 2, I'll really load up.
    21 Apr 2012, 05:13 PM Reply Like
  • I agree with opinions Apple's price is still too high and over priced, because there are many stocks which are undervalued and there's no reason Apple should not be undervalued, if you insist Apple is undervalued. Also, stock prices are not exactly matched with their value in stock market world. All stock prices are low now and Apple is in price adjustment session. Apple price was so much rallied and investors are now enjoying sell off to get profit difference. Mine was already sold to realize profit differnece.
    21 Apr 2012, 05:18 PM Reply Like
  • @Bensonaire.


    Please let me know your favorite quality companies that are a much better deal than AAPL.


    I look forward to your response.
    21 Apr 2012, 06:11 PM Reply Like
  • It's only over priced in your mind. Get back to fundamentals and common sense.
    22 Apr 2012, 12:22 AM Reply Like
  • FWIW I think the selloff could well have been to shake weak longs out for a nicer entry, but my bearish stance on the company, and on the stock remains.
    21 Apr 2012, 08:09 PM Reply Like
  • Apple will rally after close of business on Tuesday to 586. Aditional time will take it to 625. I will take profits at 625 and wait for another corrrection.
    21 Apr 2012, 08:59 PM Reply Like
  • There will be a selloff after earnings report is released at close of market on April 24. Wall Street concensus of $ 9.99 and Whisper of $ 11.31 are both lower than the last quarter earnings of $ 13.87. Besides, guidance is likely to be lower for the rest of the year. I will sell before earnings release and buy some shares back within the next 10 days at a lower price. AAPL is beginning to be a difficult stock to trade because of the hedge funds manipulators.
    21 Apr 2012, 09:41 PM Reply Like
  • Great! That idea worked excellent last earnings, didn't it? LOL.
    21 Apr 2012, 10:32 PM Reply Like
  • Everytime Jim Cramer recoommend stock when stock is already gone high. That is time you should sell when he is recommending and wait at least one month when his recommendation cool down and stock is lower , buy on dip.
    22 Apr 2012, 01:33 AM Reply Like
  • If you want to make money , buy EBAY on every fall and keep for long term.
    22 Apr 2012, 01:34 AM Reply Like
  • People says AAPL at 572 is very expensive. A PE of 16. If Apple splits its shares to 1 to 20 the share price will be 28 with the same PE and people will say AAPL is very cheap. The problem with splitting it that low is, it will be so cheap for low money speculators to short it and will be very unstable and closer to the ground.
    22 Apr 2012, 07:51 AM Reply Like
  • Bought @ $7, $14, $136, & $236. There have only ever been a few companies like Apple. The "Pundits" mistakenly see Apple as a Tech/computer company. In reality, their hardware products expand Apple's application sales, iTunes credit card business, publishing/education business and Cloud business. Their "closed source" rather than "open source" model puts Apple into enterprise business that Google and Samsung can never touch. Apple killed the Blackberry grip on Enterprise because of the closed source advantages. The new TV will not be about the TV. It will be about how we purchase the media content in the same way that iTunes revolutionized the music business. The only reason Apple's price has been kept down is because of the gross self-centered pundits, hedge fund and brokerage markets that are working SEC laws that should never have been changed that gives them an inappropriate advantage to milk the general public. Oh, by the way, Apple's educational publishing product not only saves school systems a ton of $ but research shows that students learn faster with an iPad. How about getting behind a true American business model that has revolutionized our world as much as Ford or Edison/GE!
    22 Apr 2012, 07:52 AM Reply Like
  • I am still learning options trading and still have many gray areas
    Anyone know what requirement that should be met to sell put in a given stock? What strike price to use? What expiration date? How to calculate risk of assignment? Thanks
    22 Apr 2012, 08:00 AM Reply Like
  • eagle soar...Check out Rocco Pendolas newsletter he is an author here on SA.. he explains options pretty well...good luck....
    22 Apr 2012, 11:04 PM Reply Like
  • I a very busy man, started options several years back, after I paid a company that claimed to be the alpha and omega of options trading
    They promised 70-300% return. They frolic with my investment, and I lost 5 grands within a few month in options trading.
    22 Apr 2012, 08:00 AM Reply Like
  • The problem with options is, that it is a zero-sum game.
    22 Apr 2012, 08:09 AM Reply Like
  • One advantage of the sell-off is that the downside risk has been significantly reduced on Tuesday. The sellers have already done their selling. If Apple posts a monster beat, which I think is going to happen, the upside move will be dramatic. A miss to the downside, which I think is unlikely, has already been discounted by sellers of the last 2 weeks. It might give back another 5 to 10%. A big beat could propel the price into the high 600s in short order.
    22 Apr 2012, 01:24 PM Reply Like
  • Clear and Simple if you think that Apple has had, it's run and it's has done all that it could in time... Sell...
    If u thing that Apple sill has room to the Upside, growth , products to anounced and still innovate something, .. Buy!...


    22 Apr 2012, 01:53 PM Reply Like
  • Wow look at all this bullish sentiment.


    P/Es in double digits are bubble territory... Just saying. Have fun with what's coming.
    22 Apr 2012, 02:38 PM Reply Like
  • You sure are the mega-ueber-value investor. What stocks do you own right now? You must be short everything basically.
    22 Apr 2012, 04:43 PM Reply Like
  • Another Apple short-seller?


    What a ridiculous statement! Personally I think there sure is a world of difference between a stock (any stock) that has a 10 P/E and one that has a 99 P/E. I'd be hard pressed to find anyone who thought that a conservative company like MMM is currently operating in a bubble even with it's "bubble" P/E ratio.


    Just saying.
    22 Apr 2012, 07:58 PM Reply Like
  • all I can say is thank god there are so many people who don't get it. It makes it that much easier to make money in both directions.
    22 Apr 2012, 10:29 PM Reply Like
  • Right now it's simple. Apple is over valued. Get out now, wait until the mid $400's, then buy back in. Holding on now is just wishful thinking.
    23 Apr 2012, 06:22 AM Reply Like
  • Today AAPL was going down but I kept myself not selling any AAPL and wait for after hour result. AAPL showed the fantastic result which my heart was saying. I was thinking to sell tomorrow but after this fantastic result I will keep AAPL for the next Quarterly result . It will cross previous 644 very soon and go another high. Hold patiently. Don't panic on selling day. If you extra money buy AAPL on sale day, have money on selling other stocks on higher day instead of selling AAPL.
    25 Apr 2012, 02:42 AM Reply Like
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