APPL has been due for a correction for a long time. Their main product achieved market saturation while their P/E ratio continued to soar.
Too bad I didn't have the cojones (or the faith in investor intelligence) to short it.
Too bad I didn't have the cojones (or the faith in investor intelligence) to short it.
That's why economists are famous for predicting Five of the Last Three Recessions -- they know that a dip is necessary, but not when it's going to start.
Apple laptops are nowhere near saturated. The downsides of owning a non pc have greatly been reduced if not eliminated lately. I think apple laptops could really take off.
The iphone is also nowhere near saturated. Many people are waiting for the next release or waiting until their current contracts are over to get one.
Also, the apple tv if done right, especially with the movie rental service could become the next ipod.
iPhone isn't saturated, but I'm still bearish on that. And extremely on the TV. Cable VOD has a box in everyone's home already.
Steve Jobs has done an amazing job turning around the company and much of this enthusiasm is warranted. However, the stock got way ahead of itself.
I considered shorting the stock also, but that is just way too risky. A stock only has to double to wipe out the entire investment. And, if a stock is already irrationally high, it could very well go substantially higher in the short term. However, put options may be a good way to bet on the downside while limiting risk.
At this point, I do think they are pretty close to an appropriate valuation. If they get another hit with their iPhone and their computer market share increases, they will do very well. But, I think this is far from a sure bet.
A friend of mine at Apple reminded me yesterday that they made 300m on just the interest of their war chest. A few years ago, they were having trouble making that much just on their products.
The drop may be caused partially by irrational behavior, but in poker we say that even the blind squirrel finds an acorn eventually. In this case, irrational behavior partially corrected opposing irrational behavior.
That's evidence that they'll stick around, but it's a bad sign when a company makes most of their money from depositing cash in the bank. It's irrational to value $1 of Apple-cash at much more than $1 if the main selling point is that they won't spend it: you can do just as well putting your own money in the bank, and save the brokerage commission.