It pays to ‘Think Different’ about Apple’s stock price

“About 10 months ago, I wrote that I thought Apple was worth $114-$128 per share (split-adjusted),” Jesse Felder writes for Seeking Alpha. “That day, the stock closed at $72. Today, it closed at $116, 60% higher. So this morning I sold it. ”

“Fundamentally, the company has gone from being very undervalued to fairly valued in a very short period of time,” Felder writes. “(Note: Carl Icahn, who is a lot smarter than I am, says the company is worth $200 per share. I just don’t know how much of this is salesmanship/optimism and how much is cautious analysis.)”

“I know, I know, Apple is firing on all cylinders, and will probably continue to do so. The iPhone 6 is selling like hotcakes even before we get into the holiday shopping season. New products are in the pipeline, and Apple Pay will probably be huge for the company,” Felder writes. “But how much of this optimism is already baked into the current valuation? At 5x or 6x cash flow, almost none of this was priced in. At nearly twice that valuation today, I’m not so sure. Ultimately, at the current price, I no longer have a margin of safety. Should the company stumble, and I’m not saying it will, there’s no reason the stock couldn’t go back to the $80-$95 level (where I’d probably buy it back).”

Read more in the full article here.

37 Comments

    1. Zeke, sounds like you are doing the standard buy and hold. Not a bad idea but you only make money on the total upswings.
      Based upon the authors actual post, he is a stock buyer and seller. He is not a holder. And while he did OK, if he had of waited another day, he could have made another 2-3 $ per share. So, how bright he is, is in doubt. LOL

      I have a few shares I buy and sell with Scottrade for the fun of it. There I try to buy on the dip and sell on the top and make a few bucks in between. (this is not investing, its stock trading).

      And with Apple’s huge jumps and dips, you can actually make some money doing this.

      Just saying.

      1. I do occasionally buy some options, typically LEAPS. In early 2007 I bought AAPL $150 LEAPS for about $1 each with the stock price at about $100. In December the stock price was at about $200, leaving me with about a $50 per share profit, or about $60K. Nice, but I had an on line investment group friend who used the same strategy and got a second mortgage in order to buy a massive amount of those same LEAPS. Last I heard his portfolio was worth over $20M and he had retired at the age of 40.

      2. I bought Apple on a downswing from $62.50/share into the teens (like $15 or $16/share) in 1999. Stock trading might be more exciting and fun in the near term, but it’s quite satisfying to see those shares worth about 168 times what I paid for them 16 years later.

          1. That’s an easy call on Monday morning.

            Over the years I’ve noticed that AAPL almost always hits its low for the year sometime in July, so I did sell six figures worth of AAPL in May 2013 at about $455 and then bought it all back at $402 on July 1, 2013.

    1. Owning an AppleWatch would become a commodity and Apple stock would go through the roof. I think the price of AppleWatch would eventually require a lower entry price point, though, if every member of the family is going to use one.

      All I know is if Tim Cook said there are more exciting products in the pipeline, I’m going to have to believe him at this point. I can understand if people want to take profits at this point because it has risen quite a bit but selling it all makes no sense. I’ll sell some whenever I need something, but I’m not following any strategy regarding how high the stock can reasonably go. It goes as high as whatever revenue Apple can make or maybe as high as what investors are willing to pay for it.

      Apple is able to afford to enter any business they want and possibly dominate that market. Apple’s Enterprise push has just started so I wouldn’t ignore all those corporate opportunities. Same with Apple Pay. Apple Pay seems to have a lot of backers and if Apple joins with Alibaba it becomes global. So, I don’t know if great gains are ahead but I’m sure there are definitely some gains going forward. Apple appears to be a safe investment in a fundamental sense.

      Since I’m long 2004 for 90% of my Apple stock, I obviously have a wide margin of safety and if Apple falls back to $80 (I doubt it will but you never know Wall Street), it’s no big deal. My Apple dividends continue to cover all my monthly living expenses no matter what.

      1. I noted today that Craig Federighi sold about $8 million of Apple stock, likely from granted stock options. Announcements like this normally don’t note whether an executive is cashing out a portion of their stock grants, or selling to cover options (and thus keeping at least a healthy portion of the total amount).

        I would not be surprised if some people take profits on their Apple stock in what has been an excellent year. As for me, I choose to ride out the inevitable ups and downs and will hang on to my shares.

        My reasoning: why sell a winner?

        I only sell my losers, investments that have proven to be a disappointment, companies whose fundamentals are deteriorating. That cannot be said of Apple. By holding on and reinvesting my dividends, over time, I will do very well. I once sold my shares in one account to take a profit, knowing at the time Apple would drop. And when it did, I bought the same amount back at a lower price. It was a one-time flirtation with foolishness, one I will not repeat.

        I recommend that if your investments are growing, hold on to them. With any investment, if you can’t stomach a stock dropping as much as 50% during your holding period, don’t invest in stocks. Even “can’t miss” companies will eventually see declines – Wall Street is very fickle. But if you are patient, and as long as the company’s financials are solid, hang on. In the long run, you will be the winner.

  1. It’s simple:

    There is no other company with so many revenue streams (half of which the analosts don’t even recognize) and products that that controls a percect unrivaled seamlessly integrated user experience.

    Apple has no rivals, nor any real competition and won’t for years to come.

    Apple will continue to grow take a cue from the spaceship D

      1. First version of desktop OSX released in March 2001 included early version of iTunes, followed by the iPod in October and iTunes 2.0. Same month XP was released an interesting computer history coincidence.

        Even a chain smoker with a sharp wit like yours surely knows the facts … 😉

    1. Apple hasn’t had any competition since 1997. There is no company that is a thoroughly vertically and horizontally integrated – hardware, operating system, software, content, UI, and connectivity. Nobody comes close. There are people who build things that are similar to what Apple builds. They all compete with each other for those who, for whatever reason, don’t buy from Apple.

  2. With AAPL, I won’t try to “time” things so that I sell (at what I imagine to be a high point) and then re-buy (after what I hope will be a future drop).

    Despite being HUGE, Apple can still keep secrets. The next iPhone may be leaked all of the place (because there are a lot of external people involved), but new “ventures” are closely guarded internally. Apple Pay was a surprise. Swift was a surprise. There will be more surprises.

    There is upside constraint, but selling and waiting for AAPL to drop “back to the $80-$95 level (where I’d probably buy it back)” could be a VERY long wait (maybe never). A year from now, AAPL could be above $140, and other “experts” will be advising a sell, and buying back when AAPL drops back to $120.

    In the meantime, if I sell and wait to buy back at a lower price, I miss the quarterly dividends. I was against Apple paying a dividend, but I was wrong. AAPL is not going up 50X in 15 years anymore, or 5x in five years. It’s the recurring predictable dividend that makes AAPL worth holding, along with the steady (on average), although probably not spectacular, gain in the stock itself. Use accumulated dividends to buy more AAPL, if and when a price drop actually occurs.

  3. Same old, same old. I remember being told by top shelf analysts in 1999 that buying Apple stock was throwing money away. I’m retiring at 58.5 years old, and paying cash for a restaurant to fill my golden years precisely because I ignored that advice then. I think I’ll keep ignoring Apple pessimism. It’s worked okay so far.\

  4. I just keep a Stop sale order. I raised it las week from $102 to $105. When it hits $120, before Xmas I think, I will have my broker up it to $112. I may lose $50 or $60k but I will avoid the big loss. I sleep much better knowing I have a parachute. In the past I have done straddles, etc, but they are more worrisome than a big drop. Put in a Stop order and relax as it AAPL goes up. Try it, you will see.

  5. You can sure make a lot of money buying and selling at the right time with aapl. It helps if you know when the highs and lows are going to be.
    My stock is now up 1000%. I’m thinking of selling some and trying to play the game. Problem is selling at the highs and buying at the lows.

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