Spice up your Valentine's Day with even more smokin' hot investments.
I'm a lifelong Mac user, but my ardor for Apple's (Nasdaq: AAPL) stock has been cool. It just always looked too expensive, way too hot to handle.
Times have changed, though, and Apple's increasingly looking like a red-hot stock idea. (Pardon me while I dig around the Necco Sweethearts for the "Awesome" Conversation Heart.)
Down but not out
Apple shares have fallen more than 30% since the start of the new year, and they're well below their 52-week high of $202.96. Apple is trading at just 28 times trailing earnings, and 21 times forward earnings -- quite uncharacteristic, considering the company's growth rates. (It's still expected to deliver 20%-plus annual growth over the next five years, and it's not too hard to imagine Apple exceeding such expectations, given its strong brand and track record of innovation.)
Plus, Apple's loaded with cash. It's got $18.45 billion, or a little more than $20 per share, and no long-term debt. In these troubled times, zero debt is a doubly sweet concept.
Microsoft (Nasdaq: MSFT) may have the dominant operating system, but Mac OS X continues to gain ground. (Last December, the Mac OS hit a new market share high of 7.57%, a 21.7% increase from January 2007, and Windows slipped a tad.) For all that Microsoft has tried to branch out, it's churned out an awful lot of "me-too" products, and its bid for Yahoo! (Nasdaq: YHOO) implies it's too weak to take on Google (Nasdaq: GOOG) alone. On the other hand, Apple's success at carving out a market with the iPod illustrates a tremendous amount of competitive vision.
The honeymoon's over -- here's real life
I'd just be suffering temporary infatuation if I didn't admit that Apple's not perfect, and not without its risks. For example, iPod growth has to slow someday, and some observers fear that slump's coming sooner rather than later.
Then there's competition and the media. Amazon's (Nasdaq: AMZN) digital music store offers most albums for $8.99 apiece, and the major music industry companies are either playing ball with Amazon to offer DRM-free tracks, or they're expected to. They've been reluctant to embrace the MP3 format, but seem very eager to loosen Apple's grip on the market.
And what about the underwhelming MacBook Air, which sports sexy looks but lacks many of the features that most modern laptop users require?
The iPhone is elegant (although we've fielded some iPhone panic recently), but then again, Steve Jobs had to issue a massive mea culpa when he cut the iPhone price just two months after launch, burning early adopters fast.
And don't forget Jobs himself. He's known for being a great mind in technology and design, but his ego is equally infamous. And leaders with a little too much ego can bring trouble -- we already had a taste of that when Apple's stock options-backdating scandal bruised the company.
Be mine, valentine
Still, concerns can yield great bargains. Worries about a consumer-led recession, and the conservative guidance that tempered Apple's blowout quarter, have also helped polish up a tasty but cheap Apple. This time, Apple looks like it's shaping up to be a stock all kinds of Foolish investors can love.
