Piper: Apple a 'buy' despite stock slide
updated 09:30 am EST, Wed January 23, 2008
Piper: Apple still a 'buy'
Apple stock should still be rated a "buy," despite its recent stock slide, say Gene Munster and Michael Olson from the research firm Piper Jaffray. The analysts first deconstruct the reasons for the drop: foremost may be Apple's guidance for the March quarter, which has an EPS 15 percent below expectations from The Street, at $0.94, but with revenue only 2 percent lower, at $6.8 billion. Year-over-year iPod growth was also only 5 percent in the December quarter, versus 50 percent in the same period of 2006. Finally, the state of the economy may be deterring even wealthier people from buying expensive electronics.
The depressed state of Apple represents a buying opportunity however, according to Munster and Olson. They suggest that the investor panic is an overreaction, in part because Mac sales are continuing to grow; December-quarter market share was in fact 3 percent higher in 2007 over 2006, the largest Mac share increase in at least seven quarters. Valuation of Apple stock, meanwhile, is currently at 25x NTM EPS, whereas the two-year low is 24x, and the two-year average is 31x.
The 2.3 million Macs sold last quarter is further said to be a 7 percent sequential growth, instead of what could have been a flat figure for the past two years. Slowing iPod sales are said to be a serious concern, but Apple claims that the iPod touch is just the beginning of a Wi-Fi mobile platform, and so there is still plenty of economic potential.
no s***
01/23, 09:42am reply
buy, buy, buy. Anybody who intends to buy and hold even for a moderate period (6-12 months) will be very happy buying at the current price.
climacs
Fresh-Faced Recruit
Joined: Sep 2001
I agree
01/23, 09:49am reply
This is the best buying opportunity for people looking to get in to AAPL in a very long time.
Things to keep in mind: 1. They have a ton of cash. Over $18B, I believe. 2. Residuals from iPhone contracts have not been realized yet.
chefpastry
Mac Enthusiast
Joined: Nov 2005
Bought last night
01/23, 10:05am reply
Will buy more if it goes down - Excellent buying opportunity for those that can weather any storm. I also bought gold bullion at its last little drop in price a few days ago. Cheers and good luck!
ocfra
Fresh-Faced Recruit
Joined: Jan 2008
keep in mind.....
01/23, 11:02am reply
...for every Apple stock seller who thinks it's time to bail out, there is an Apple stock buyer who thinks it's a good time to buy - no matter what price. I plan to wait a bit to see how this market correction plays out. I don't think we're near the bottom, yet.
psdenno
Fresh-Faced Recruit
Joined: May 2003
Rescue?
01/23, 11:06am reply
This is BS if you ask me. What if analysts expected Apple to sell 50 million iPods and they only sold 44 million? Would the iPod still need rescuing?
It sounds more like the analysts' ability to make predcitions needs rescuing. Apple is selling more iPods than ever before - it sounds like they're doing fine.
hayesk
Professional Poster
Joined: Sep 1999
expectations
01/23, 12:23pm reply
it's all about expectations. AAPL was indeed trading at a rather high P/E, which meant analysts expected Apple to continue blowing way past its traditionally conservative predictions. So when Apple merely does really, really well, ~$190 a share seems high.
I put in an order at $130 and it was filled this morning... I'm confident six months from now it will have been a screaming bargain. In fact I think a lot of tech stocks have become cheap right now, there's a lot of irrational panic in the markets.
climacs
Fresh-Faced Recruit
Joined: Sep 2001
NTM?
01/24, 12:59pm reply
What does the NTM acronym stand for as in "25x NTM EPS". I understand that the AAPL share price is twenty-five times the company's annual earnings per share, but NTM?
Salsa
Junior Member
Joined: Oct 2003