“The recent drop in shares of Apple (AAPL) has probably been more pronounced than most expected. It’s true, the stock was very expensive at its all-time high of more than $200 per share (40 times forward earnings), but the catalyst for the sharp $80 per share drop we have seen recently was the company’s extremely conservative guidance for the current quarter,” Chad Brand writes for Seeking Alpha.
Brand writes, “Apple always sandbags quarterly guidance, so this did not come as a surprise, but evidently investors were hoping they would have been a little less cautious. However, in this day and age, when quarterly guidance is given simply to help out Wall Street analysts, under-promising is the only way to go. This is true even more right now, as the economic climate is highly uncertain.”
Brand writes, “Despite all the reasons to be worried, the fundamental story behind Apple is still strong.”
Brand writes, “The current share price of $119 looks very attractive if investors are willing to wait out the uncertainty in the economy. Not only does Apple stock trade at only 22.6 times this year’s expected earnings, which will likely prove conservative as usual, but the company has quietly been building up a gigantic pile of cash… Apple currently has $21 per share in cash, with no debt, yet another reason to be attracted to the current stock price after a drop of more than $80 from its high.”
Full article here.