Apple at $500: A Cheery Consensus

Warren Buffett once wrote that "you pay a very high price in the stock market for a cheery consensus."

Apple (Nasdaq: AAPL  ) investors, beware: There's a cheery consensus about the company behind the iPad, iPhone, and Mac computers. Consider:

Analyst Opinion, February 2012

Number of Analysts, February 2012

Analyst Opinion, February 2011

Number of Analysts, February 2011

Strong Buy 24 Strong Buy 28
Buy 26 Buy 22
Hold 3 Hold 3
Sell 2 Sell 1

Data from Yahoo! Finance.

Of the 55 analysts Yahoo! Finance lists, just two are bearish on Apple at today's $500-plus price. Only one analyst was bearish this time last year, and the stock has gained some 40% since then. (Bloomberg tracks 56 Apple analysts ... and recently profiled the only one with a "sell" rating.)

Short interest, another bear indicator, is also modest. Short interest in Apple stands at just 1.14%, lower even than IBM and Johnson & Johnson.

As the stock has risen over the past decade, shorts have been burned -- or converted Apple believers. The following chart shows Apple's share price (blue line) versus the number of shares sold short (gold line).

Source: S&P Capital IQ.

I don't blame investors for removing their money from the path of the Apple freight train. And to be clear, I'm not calling for a hiccup for Apple -- I recommend watching Fool.com technology analyst Eric Bleeker's positive outlook for the stock. With all that cash, Apple seems well positioned to weather any economic climate, and the stock's trailing and forward price-to-earnings ratios are reasonable.

So Apple investors, here's the bad news: In the stock market, near-total agreement is rarely a good thing. But take solace in the good: Even though there's a cheery consensus, it hasn't driven up the stock's price multiples.

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Fool.com managing editor Brian Richards doesn't own shares of any companies mentioned. The Motley Fool owns shares of Apple, Johnson & Johnson, and IBM. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Apple, creating a bull call spread position in Apple, and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 19, 2012, at 5:31 PM, sidste wrote:

    A $500 price and 40% annual return do not make a stock over priced.

  • Report this Comment On February 19, 2012, at 6:29 PM, yxd0950 wrote:

    Based on your logic, if $500 is a cheery consensus, then how would you call BRKA's price? Please stop writing trolling articles without any substantial analysis to support your claims.

  • Report this Comment On February 19, 2012, at 8:53 PM, Techdude550 wrote:

    Suggestion, for simplicity: delete column 3 in your table; rename column 1 "Analyst Opinion."

  • Report this Comment On February 19, 2012, at 9:34 PM, EquityBull wrote:

    This was not a good headline or article. I expect more from fool.com

  • Report this Comment On February 19, 2012, at 11:06 PM, Rudn wrote:

    You are living up to your name with this nonsense.

  • Report this Comment On February 20, 2012, at 12:43 AM, peto3 wrote:

    It's scaaaarrrryyyy - what some "journalists" will do to try and talk down a stock without any reason other than they obviously think they can.

    Cheerio, sucka ...

  • Report this Comment On February 20, 2012, at 2:16 PM, Regarded49 wrote:

    Apple will prove to finally have an appropriate share price, which would be more in line with a PE of 25-30 given their products, cash, future products, earnings, revenues, and projected growth. In other words, 1000/share- 1500/share without an anticipated split.....if they pour on a dividend, and a split ( lets say 10-1) then all hell will break loose on this undervalued stock of the century.

  • Report this Comment On February 20, 2012, at 2:58 PM, TMFBrich wrote:

    I don't get the backlash here, folks. My point was a simple one: to point out that it's nearly impossible to find an Apple bear. No analysts, no short sellers ... and anecdotally, no retail investors I've talked to.

    I'm neither long nor short Apple. As I say, there's a lot to like about the stock ... but I found it interesting that there are so few voices of dissent in the crowd. It's just an observation (and my opinion) -- to be clear, I'm not predicting a drop in the stock.

    Regards,

    Brian Richards

  • Report this Comment On February 20, 2012, at 5:13 PM, Regarded49 wrote:

    You do not own shares of the stock, yet you think too many folks are positive about it? Perhaps the analysts have read the fundamentals, have you?

    Contrarian views say that when everyone is on board the ship is about to sink. Guess what, there are times that the fundamentals so far outweigh that thinking that the boat will just have to get bigger!

    Apple is one of those stocks that are defying the odds. Doesnt happen often, but a blogger should know better than this and MF should as well.

  • Report this Comment On February 21, 2012, at 9:13 PM, sidste wrote:

    @ TMFBrich,

    There are a few investors out there who are bearish on AAPL, but that is not the interesting point wrt this stock. The interesting part is that investors and analysts are highly bullish on this stock, and have been for some time, while the value proposition continues to improve (p/e compression). This is the paradox AAPL investor's have lived with for the last several years while stocks like AMZN get all the benefit of the doubt... and them some.

  • Report this Comment On February 24, 2012, at 11:42 AM, Octobyra wrote:

    From a technical view of Apple's chart, there is a significant gap from 425 to 442. Gaps often presage a fallback to those levels. It's impossible to know how high Apple will climb before falling back, if it even does. Methinks the high frequency hedge fund traders will decide that for us.

  • Report this Comment On February 25, 2012, at 7:35 AM, normark wrote:

    Apples P/E is to day on my iPhone 14,87 at 522.

    Your very recommended Whole Foods Markets P/E is 39,12 at 82

    You mentioned the Gilette story which sells a razor and make a living on selling the blades.

    What about Apple who sells iPhones and iPads and now are coming close to 25 billions apps.

    Isn't that as good as razor blades ? They have at least 0,3 $ income from each app and very low decreasing costs.

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