“In light of the negative reaction to Dell’s poor quarterly showing, it’s worth revisiting the stock, to see just how vulnerable it is now,” Richard Suttmeier writes for RealMoney.com. “Dell’s second-quarter EPS was in line with consensus analyst expectations, at 38 cents, but sales missed. Sales for the quarter were $13.4 billion, higher than the same quarter last year but short of the expected $13.7 billion. The company expects third-quarter earnings of $14.1 billion to $14.5 billion and EPS of 39 cents to 41 cents. The Street anticipated that Dell would offer third-quarter EPS guidance of 41 cents on sales of $14.6 billion. This soft guidance is what prompted the negative market reaction.”
Apple “shouldn’t be too damaged by Dell’s selloff,” Suttmeier writes. “Apple Computer (AAPL) is currently 5.9% overvalued with fair value at $41.53, and it has a positive weekly chart profile. This is a much better screen than what we saw when I first profiled the stock on March 1. Back then, the stock was around 77.9% overvalued, trading near $44.50. After declining more than 20% into April and May, Apple held my annual value level of $34.22 and was 12.4% undervalued. With the success of the iPod and its positive halo effect on sales of Apple computers, Apple can hold up better than Dell on weakness. I view Apple’s current fair value level of $41.53 as support, but shares should have difficulty rising above my monthly risky level of $45.38.”
Full article here.