AAPL A No Brainer At These Levels (AAPL, rated BUY)
Posted on February 02, 2008 at 23:32 PM EST
Even for the most bearish investor, Apple in the $130's is a strong buy solely on valuation. In Apple Computers, you have one of the strongest, most innovative stocks of the past half decade that has clearly been oversold. A slightly disappointing MacWorld and yet another conservative forecast from Apple certainly does not justify a 35% drop from its recent highs. For long term investors, Apple at this level is extremely attractive as well. Many traders forget that selling Macs is still Apple's most profitable source of revenue, and the Mac business is roaring along. A recent study found that Mac share will double by 2011, and it is not overly optimistic to assume that it will continue to take off from there. In recent earnings, one reason Apple was hammered was the disappointing growth (5% I believe) of iPods. However, as Apple turns their MP3 device into a mobile WIFI platform (i.e. iPod touch), not many shareholders realized that iPod revenue was still robust (17%). Finally, the beloved iPhone is doing just fine. Just to put things into perspective, at these levels, Apple is trading just above the amount they were immediately after the announcement. Although the iPhone has certainly not been a blow-away success, it has met estimates and grabbed immediate marektshare in the mobile handset market. (One final iPhone point is that the iPhone is only available with a moblie phone carrier in the USA, UK, Germany, and France. Keep in mind that an expected partnership with China Mobile would alomst certainly boost stock prices.) If all these reasons have not presented a compelling case for AAPL at this price, just keep in mind, that AAPL still has the incredibly innovative Steve Jobs, loyal brand-concious consumers, and nearly $20 billion dollars in free cash. In addition, the ten analysts that have reported post earnings (1/23/08) have a mean 12 month target price of $196 and an average buy rating. (Although I am not nearly as optimistic, Gene Munster from Piper Jaffray has maintained his $250 target price on the stock.) Even though the next 2-3 quarters may be a bit rocky, Apple trading below its forward P/E and expected growth rate is a no brainer at these levels.