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:



CAPS stars (5 max)


Total ratings


Bullish ratings


Percent Bulls


Bearish ratings


Percent Bears


Bullish pitches


Bearish pitches


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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