Archive for the ‘Apple: To Buy Or Not To Buy’ Category

Apple: To Buy Or Not To Buy, That is the Question

January 23, 2008

For the last few years, Apple has been one of the hottest companies–and stocks–on the planet. But this week, the Apple aura took a huge blow when the company reported softer-than-expected iPod sales and provided earnings guidance below analysts’ expectations. Today, the stock plummeted 11% to $139.

What should investors do now? My gut feeling told me to avoid Apple like a New York City train during cold season. But I’m starting to feel more bullish about Apple after doing some homework. My colleague Peter Burrows provides a pretty convincing case that “there are signs that Apple can not only weather an economic contraction but emerge stronger than ever” thanks to growing strength in its PC business of all things–which produces triple the profit of an iPod.

Mark Kandel from Goldman Sachs actually raised his earnings forecast for Apple (only 3 cents) as a result of “strong Mac growth, increasing iPhone revenue, better gross margin, and a richer mix of iPods.” Toni Sacconaghi from Sanford Bernstein maintained his estimates but wrote that “trading prices (i.e. below $140 share) provide an attractive entry point.” Still, he is cautious, arguing that iPhone expectations “may still be too aggressive”; he also thinks the recession could crimp consumer demand–even for Apple products.

What are you doing?

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