Congressional inaction torpedoed several tech stocks yesterday. Research In Motion (NASDAQ:RIMM) fell 12.8%, Nokia (NYSE:NOK) declined 10.6%, and Dell (NASDAQ:DELL) shed 9.4%.
But for Apple (NASDAQ:AAPL), down 17.9% for the day, enemies were to be found on both K Street and Wall Street. Analysts at RBC Capital Markets and Morgan Stanley downgraded the iEmpire's shares amid reports of slowing growth, The Wall Street Journal reports.
Hi I'm a Mac and ... Hello? Is anyone there?
Morgan took the harsher stand of the two, saying in a report that Apple had reduced orders of Macs and iPhones from its manufacturing partners. Market tracker NPD, meanwhile, said that Mac sales growth slowed to 23% in August, down 20 points from 43% growth in July.
But is that as bad as it might seem? Maybe. Of the last 75 investors to make a call on Apple in CAPS -- all of which were entered this morning -- only 11, or 14.7%, say the stock will underperform the market. The good news is that's a pretty small ratio. The bad is that it's higher than Apple's prevailing bull-bear ratio -- behold:
|
Metric | |
|---|---|
|
CAPS stars (5 max) |
*** |
|
Total ratings |
19,364 |
|
Bullish ratings |
17,844 |
|
Percent Bulls |
92.1% |
|
Bearish ratings |
1,522 |
|
Percent Bears |
7.9% |
|
Bullish pitches |
3,934 |
|
Bearish pitches |
432 |
Data current as of Sept. 30, 2008.
Apparently investors have soured on the stock somewhat. An 18% drop will do that. But, as a long-term investor, I still like Apple's valuation very, very much. Here's why.
Let's start at the balance sheet. Capital IQ shows Apple with roughly $20.8 billion, or $23.45 a share, in cash and investments. So, as of yesterday's close, more than 20% of the iEmpire's market value was denominated in liquid assets.
Doing the math -- $23.45 subtracted from $105.26 -- shows that Apple's earnings power was valued at just $81.81 per share, or 16 times trailing earnings. Contrast that with the S&P 500 SPDR (AMEX:SPY) exchange-traded fund, which sells for a shade more than 13 times trailing earnings. That's not much of a gulf.
Slowdown or no, Apple is a superior grower with superior products. Yesterday's downgrades, and the ensuing shellacking, were a huge overreaction.
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