The iMac maker's shares were shown no quarter after preannouncing disappointing earnings last night. Here are gathered thoughts from David Gardner, analysts, and readers like you. While some investors are licking their wounds today, others are licking their chops and thinking “buy.“
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With the shares off some 50% in trading today, we surfed the Web, Fool HQ, and elsewhere to gather viewpoints on the company and today's market value carnage. Please take a look, then share your own thoughts on our discussion boards.
From David Gardner
"I have thought of Apple potentially as a Rule Breaker at a few points in the past few years," writes Gardner today, "as I have been and remain a Steve Jobs fan, and in a very casual way have admired the birth and branding of the iMac."
"That said," said the man behind The Motley Fool's Rule Breaker Portfolio, "I could never figure out what this company was the top dog and first-mover in. Apple has built an enviably loyal customer and shareholder base, though it's been a lot easier to be loyal to the products over the years than to the stock. Watching, in a space of a few hours -- a blue-domed, sparkling, and otherwise gorgeous day here in Alexandria, Virginia -- shares of AAPL lose a quick $8.5 billion of the previous $17 billion market cap is not just breathtaking, but instructive for investors.
"The instructive lesson for investors is that even something large and with a firmly rooted base of support can -- zzzzap! -- get blitzkrieged by the markets in the space of a few winks. Even those of us who are not Apple shareholders can feel some empathy for any fellow investor whose investment (and whatever plan that money was part of) got torched so very quickly. It's what makes our world so wondrous and dynamic, that you never really do know what will happen next. Mornings like this remind us all: Don't fall in love with any one stock."
From Foolish Analysis
"The company's primary competitive advantage is its innovative nature," wrote Foolish Stock Research analyst John Del Vecchio in a July story. "Companies can live or die by that sword, but Apple also controls its platform and users can expect powerful hardware and software that will push the envelope and continue to propel Apple in its beyond-the-box strategy. The announcement of an upgraded iMac and the possibility of an entry into the rapidly growing PDA market will likely create a catalyst for Apple shares and provide a solid foundation for future operating performance."
Fool writer Bill Barker, now feeling sheepish about recommending Apple to his mom earlier this year, following up on that today.
"Today Apple is certainly dying by the sword," said Barker. "The 'cube' seems to be a problem despite how cool it looks. The gross margins for Apple are going to have to suffer as a result of designing newer and cooler and more expensive things that it turns out it can't sell very well. Prices are going to come down, and profits as well -- that's a given. But I'd be loath to give up on Apple's long-term competitive advantage so fast. Innovation is an awfully powerful tool to have as your primary advantage when you've got Apple's track record. At least the Apple-with-Steve-Jobs track record."
"John also mentioned the possibility of getting into the rapidly growing PDA market -- an option which still exists," continued Barker. "Whether Apple can do so in a profitable way is a question that is outside of my sphere of competence to answer intelligently, but for those with better insight into that matter, there may be something here."
"Finally, I look at the enterprise value and I wonder how to justify Apple's low price today. After all, it's got a market cap of $8.5 billion, and as of the end of last quarter was sitting on $3.8 billion in cash and short-term investments," Barker added. "Apple's trading at just 2x book value. There could easily be something here for the value-oriented investor."
From Our Community
"Why pay more for a computer and software that won't work with anything else?" asked shuffm on our Apple discussion board. "It's perhaps the arrogance of Apple that will set them back the most. Less and less people consider them to be a superior computer than years ago, and they can't just automatically expect schools, not-for-profits, and government agencies with small budgets to default to buying an Apple computer anymore."
But hunter32 wasn't buying: "A company has a problem with a vendor and with getting an important product out on time," read a post in response to shuffm's. "The products will eventually come out. The company is still profitable, the company has products lined up in the pipeline waiting to take advantage of the new OS and chip. The stock falls because of a downward adjustment on growth forecasts. Not because someone doesn't like the business model."
One who apparently was buying was kmdesignfools, who wrote: "My retirement account just got an infusion of fruit supplement that should provide for those 'latter years' quite well, thank you very much."
kmdesignfools sees these Apples on sale at a deep discount, saying "50% market value loss in one day... give me a break. Nah, give me 400 breaks @ 26."
That's just a small sampling of what's going on our Apple discussion board at present, and investors who want to chime in are encouraged to visit.
From Wall Street
"It's more of a company-specific problem than an industry-wide one," money manager Bruce Raabe told Bloomberg. "Apple is competing on its own, to some degree, because they're catering to a different clientele'' with personal computers.... The expectation for Apple was probably higher than it should have been."
"Apple's faced that daunting task of competing against an industry that has incompatible products," he continued. "They're not compatible with the standard established by Microsoft, so no matter how pretty or user-friendly they are, it's an uphill battle."
Waddell & Reed analyst Venu Reddy wondered why investors were just hearing about this today. "They should have made this announcement already," read an interview with Reddy in a Bloomberg piece. "Management was saying two weeks ago that everything is fine. When they knew there were problems, they should have come out and said it then."
"The company needs to improve their market share, instead of just upgrading for their existing customers," Reddy continued. "They need to get into new markets. What those new markets are is a good question. The question is, 'Are people buying a computer for looks or utility?' " Reddy said, "and this shows they're doing it more for utility. Some of the other computer makers aren't having the same problems."
Your Turn:
Share your thoughts on the Apple news and these comments on our Apple discussion board.
Related Links:
Apple Gets Cored, News & Commentary, 9/28/00
Apple Earnings Preview, News & Commentary, 7/14/00
Motley Fool Stock Research: Apple
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