Once I was betting that Apple Inc. could climb above $200 a share without much difficulty considering the marvelous people, products and innovation this company has in its pocket. It did breaches above $200 a share but for a very short period before lost about 40 percent of its market capitalization (it’s market caps is $108 billion) in only two months thereafter. Long story short the Murphy Law came to take its toll. People who short the stock applause but could the rhythm is about to change?
It’s definitely very tempting and investors or traders who have been following Apple Inc.’s (Nasdaq: AAPL, stock) stock are drooling now. From P/E (price earning ratio) of almost 50 times its earning the stock is currently trading at 26.20 it’s multiple. And we’re talking about a company with no “debts” but over $25 billion in annual sales and earning per share of $4.55, not to mention annual sales growth of 35 percent (against industry’s 25.7 percent) and annual income growth of 57.5 percent (versus industry’s 46.5 percent). What more could you ask for? It’s rather sad that Warren Buffett doesn’t understand the business of technology else he could be drooling as well.
Now, why should you wake up from your sweet dream and pay attention to this Apple Inc. stock? Let’s summarize it for easier illustration:
- It’s cheap at P/E of only 26.20 for such a (do I need to promote Apple Inc. again?) well managed and established company. In another words, it’s on 40 percent “discount” from its peak of $202 a share.
- The technology, innovation and development, leadership, people, products & quality and branding have not change for the worse. Unless Steve Jobs makes an abrupt exit the same way like Gamuda Berhad’s founder, the company should continue to shine.
- Technically, the $120 should provide adequate support. Every Tom, Dick and you know that U.S. economy is in screw-up shape and things could only get better after 2008. Uncle Ben is going to cut the interest rate again regardless whether he likes it or not. Unless some idiots go and blow off themselves in the name of holy way, how worse could the Wall Street becomes?
- After Wednesday’s trading hour, Apple Inc. COO Timothy Cook reiterated the firm’s 10 million iPhone sales forecast for 2008. He further noted that while year-over-year iPod unit shipment growth was 5% in the December quarter, year-over-year revenue growth was at a whopping 17% – the fastest in a year. So far Apple Inc. has shipped over 4 million units of iPhone.
- Apple boss Steve Jobs is flying more spending $550,000 (three times the average) on airplane expenses. Analysts read it as a bullish sign, hinting that Jobs is trying to push up distribution deals for the iPhone and deals with Apple’s suppliers. Furthermore Apple Inc.’s research and development spending was up 34% in the December quarter although that amount is only a fraction (2.56 percent) of the sales figure.
- Possible of share buy-back since this giant is sitting on a mind-boggling $18.5 billion pile of cash which translates into $21 for every Apple’s stock. Investors would love it if the cash could be returned back to shareholders in terms of dividend. But with Apple Inc. stock at such a discount, the time couldn’t be better to buy back the shares outstanding (currently at 879 million shares) and instantly boost the EPS (earnings per share). An estimated $10 billion could boost EPS by 10 percent, enough to send its 2008 financial years EPS estimate of $5.14 to $5.65.
# TIP: If the $120 support level is breached, prepare to make money by shorting the stock or load up your Put Options because it will goes down to $90 a share level. And $30 a share difference could make you tons of money.
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