“At $86 a share, Apple is now trading on just 16 times forecast earnings, the lowest level in years,” Brett Arends writes for The Wall Street Journal.
“That’s pretty modest. Shares no longer requires much growth to justify the share price. And that $86 includes about $18 per share in net cash and equivalents. The company enters the downturn with a solid balance sheet and a matchless global franchise. And, importantly, Apple has barely begun selling to the billions of emerging consumers in Asia. Collapsing prices of components, incidentally, will also be great for profit margins and may help offset slowing sales,” Arends writes.
“And Apple may actually do OK among Western consumers, too. Customers will keep coming in. Sure, they may trade down to cheaper models, but they probably won’t switch to PCs. They far prefer Apple’s products and customer service — and with good reason,” Arends writes.
“And although Macs may cost more up-front than PCs, they may even work out cheaper in real terms over time because they are apt to have fewer problems,” Arends writes. “As I was reminded recently, when I needed to buy a laptop. Without really thinking, I went to Best Buy and bought a PC made by a respected manufacturer.”
In the full article, Arends describes his problems; in a nutshell: bad news.
Arends writes, “So I went straight out and did what I should have done at the start – I bought a Mac. Bliss.”
Full article here.
[Thanks to MacDailyNews Reader “dslarsen” for the heads up.]
WSJ has got it right. The most interesting point for me was “… Collapsing prices of components, incidentally, will also be great for profit margins and may help offset slowing sales,”. I hadn’t made that connection.
I’m expecting that when institutions get back in the market in early 2009, they will build fresh portfolios, we will see a recovery of APPL stock prices. It is more of a question of when will this move happen rather than if.
WSJ has got it wrong. Buy on strength. How many people have been telling us to buy AAPL as it went from its highs to the current price. Buy and hold strategies for the individual investors can work out but often they don’t. Just think of GE, MSFT, CSCO and INTC back in 2001.
Also, consider that most growth stocks fall on average 72% once their run is over.
Finally, follow the big money. They’re the ones that cause those famous patterns to appear on the chart. It all has to do with human nature. That’s what a chart is really a picture of. The big money, (mutual funds, hedge funds, etc.) can’t take on or unload all their shares at once. It can take weeks, even months to do that. When they buy or sell, you’ll know it. (If you know anything about chart reading.)
Follow their lead. At the moment, the trend for AAPL is down. Don’t argue with the market. Your money could be put to good use elsewhere. Cash is better than a loosing position.
Apple is a great company but that’s no reason to put on blinders to what is going on with their stock.
Learn how to find stocks with great earnings and sales. Buy when the market is in an uptrend and try to focus on those stocks that are in leading groups.
investors.com is loaded with more information if you’re interested.
Buying AAPL right now is a bad idea. Take it from long-time investor in Jobs who sold his entire stake in AAPL at $170/share. It’s not AAPL or Jobs – they’re absolutely amazing. It’s the economy, which is only going to get worse by the day. I love America and I love Capitalism, but this country is being masterfully eroded. If nothing else, screw investing in any stock and get educated.
Google Ron Paul and the Economy. It’ll be an eye-opener.
Back in 1999-2000, it appeared every analyst had a sell rating on AAPL. Every time there was an Apple coverage on print or by the talking heads, the forecast was always gloom and doom. On the tech sector, the darling stocks seemed to be AOL+Time Warner (TWX was it?) and ATT’s new wireless division (T). Recession was already underway as the new president was settling in. The novelty of those colourful iMacs was wearing thin. Introduction of iPod was still a few quarters away. If all you believed was the market analyses, even Steve Jobs (he sold much of his stock grants by ’99), AAPL was swirling its way down.
It was at this point, and I’ll readily admit that it was no more than emotional reasons alone, that I invested on AAPL at $14/share before the split. It remains the best investment of my life, supporting a company that I care about made a pretty penny for me as well.
So, with all due respect to all the great analysts and market watchers out there, personal experience tells me that acting according to the money trend alone should not be the final or the smartest call. Especially if you are evaluating a company that has a plan or two in motion. Go AAPL.
You cannot think of Apple in the same way you do traditional companies because Apple is not a traditional company. They’ve demonstrated time and again their ability to open new markets or create a new market out of an old, stale one. Nobody can do what Apple does…which gives them a distinct edge that nobody else has.
Apple is a genuine creator and innovator; they are years ahead of everyone else. I’m sure they have stuff in their labs no one else has or will come up with. They’ve demonstrated an overall strategy to what they are doing and creating and it looks very very good. They are expanding outward when everyone else including Microsoft is contracting.
The fact that they’re debt-free and have $25 billion in the bank is rather unique too…investment firms, financial institutions and many banks would love to be in that position right now.
“Think Different” about Apple when it comes to investing; I’m buying all I can afford. They’re the only ones that can weather what’s up ahead, and they’ll probably do it while growing and gaining. I don’t know of any other company that even comes close to having and performing like Apple.
You guys aren’t listening. AAPL will soon have $40 Billion and cash and no debt and it won’t matter to their stock price. America is $70 Trillion in debt and getting worse by the minute. AAPL will weather the storm remain viable for a long time but it’s the state of America that you should be paying much more attention to. I was there when AAPL was at $13.90 a share. It was a good bet then for a number of reasons. The playing field has changed. If you’re going to invest, consider investing overseas. It doesn’t matter how well AAPL does – if the economy goes into the gutter, so will AAPL.
Now, if the stock hit $40/share, then yes, buy a bunch and wait it out. But at $85/share, I’d say it’s too risky given the economy in general.
Except I get $27 not $18 in cash.
And reported earnings defers iPhone revenues.
The financial case is stronger.
HOWEVER the sentiment is completely negative. So it may go lower, and it may not recover until there is more visibility as to how the economy is/will affect their business.
It can go lower. But unless the company’s cash flow turns negative I don’t see how it can stay there. And Apple is pretty lean, so for cash flow to go negative business would have to fall off a cliff.
@Jeremy: $40 B in the bank and $40/share?? At that point, Apple could just buy back half the company with less than half its cash and send the shorts to their grave overnight. And since it’s obvious… that won’t happen.
Not only does Apple have a ridiculous amount of cash… it has very little need operational need for it (since its cash flow is much stronger than it’s GAAP earnings.) Its only purpose is to be old school conservative and insulate Apple from the capital markets.
Okay, buy AAPL like crazy. I love AAPL to tears. Will buy again perhaps someday. But I’m just saying, the US economy is tanking. I don’t think most people even have an inkling of just how bad a foundation this country is standing on. It doesn’t matter how much money AAPL has in the bank if America is bankrupt.
Google Ron Paul and the Economy. Get educated.
“At the moment, the trend for AAPL is down.”
Looking at its chart, I see the moving average declining slowly, and a head-and-shoulders bottom forming. The stock hit the mid-80s in Oct., bounced up then fell to 80 in Nov., and bounced up and fell to the mid-80s in Dec.
I think the next three months will take it up 40 points, to 125, because I expect an upside earnings surprise, positive product announcements at MacWorld, and a subsequent rush by funds to get back into a solid growth stock.
The article contained this interesting statement:
“If a PC costs $400 less than a Mac but wastes half an hour of your time each week, over three years you’re putting in 78 hours to save $400. That’s barely $5 an hour: Not even minimum wage.”
@doc e and others,
“You cannot think of Apple in the same way you do traditional companies because… “
Actually, you can and should. That kind of statement is what we hear time and time again as growth stocks tumble. Yes, at some point you ‘might’ be right and it will turn around. Are you really good enough to call the bottom? Why put money in a stock that has proven nothing of late other than its ability to fall in price?
It’s easier to recognize strength. And while the “money trend alone” isn’t enough to buy a stock, if the money trend, i.e. buying by the big money investors isn’t there in a stock like AAPL, the price WILL NOT go up. It is a requirement that you can not ignore. Individual investors don’t move the price of a stock.
I love Apple (the company) too but to buy any stock based on the kind of emotion expressed here is a huge mistake.
But I’ve been saying this out here for months now and I doubt it does any good. All I’m saying is, before you buy into something, would hurt to do just a little reading on what I’m saying? Do just an hour or two of research and find out if what I’m saying carries any weight from reputable sources. I don’t know of a better financial newspaper than Investor’s Business Daily and while you may not be able to go to their web site and find an article on APPL at the moment you should be able to read enough in the free areas to discover what to look for in a stock. They won’t really give you stock picks but they’ll teach you how to find your own buy candidates.
There’s nothing “new” in the markets. It just repeats over and over again. Human nature is what it is and the sooner you approach your investing from that point of view, the better off financially you will be.
To Jeremy Richter:
Steve Jobs is currently the largest stakeholder in AAPL shares, with 5.5 Million shares.
The only time he sold in recent memory is when a large grant vested and he was forced to pay taxes on the receipt immediately. One option to pay those taxes is immediately fork over free cash. Another option is to immediately “sell” whatever fraction of the received shares is required to offset the tax burden. Jobs chose the latter option, as most people do. The result is that Steve Jobs ended that day owning more shares of AAPL than he did when he woke up that morning. You can hardly call that “selling all of his shares”.
You should get educated about your topic before posting.
Thompson
“Thompson”,
I sold MY shares at $170/pop. I’m flattered you’re confusing me with Steve Jobs, though
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What I’m trying to point out is that it’s America, not AAPL, that is the bigger thing to be thinking about. AAPL could post $10 Billion Dollar profits per quarter, but if America is bankrupt (and at $70 Trillon in debt, it’s almost there), then it doesn’t matter what Apple does. When I said “get educated”, I’m referring to our economy. Google Ron Paul or Peter Schiff to learn more.
It was a good run with AAPL. Best 10-Year Investment I ever made. My wife almost left me because I took a significant portion of our savings and bought the stock when it was at $14/share back in the day. Years later she admitted that she was thrilled that I did it but if I ever did it again to “consider it a divorce”. So I love AAPL more than most – it’s America that I worry about. And America tanking has huge implications on every stock in the market.
1. accumulate
2. hold