Sunday, 25 March 2012

AAPL - lets get one thing quite clear

Perspective from a Permabear

This will be an odd posting, coming from me, but as ever, I am trying to be balanced and endlessly touting over-valued stocks gets tiresome after the 1000'th post. More than anything in the last quarter century, I've always been the one touting 'fair value' for something, so lets consider what is without question the ultimate tech' stock right now in the world.

There has been endless talk over AAPL over the last 4 months since it finally broke upward. Some say the recent breakout is reminiscent of SLV for instance. Sure, the charts look the same, but then..what about 'fair value'?

AAPL, daily, near term

Some basic stats on AAPL: see.

Lets get this absolutely clear about AAPL...

Compared to the rest of the lunatic market, AAPL is cheap. In fact, it remains roughly 45% under-valued relative to the main indexes.

Now, my 'fair value' for even the best growth stock in a depression era - which I'd argue we are in, would call for a PE no higher than around 10, 12 at the very most.

AAPL is currently valued at 12 - based on forward earnings expectations.

The current SP' P/E ratio is around 23/24.

Unlike most of the over-hyped crazy momo stocks out there, at least AAPL does have worldwide customer acclaim, excellent profit margins of 25% (net), and what appears likely to be at least a few more years of good growth ahead - and that would STILL largely be the case regardless of any significant economic down turn.

Near term prospects

MACD daily cycle is headed down, and we may go negative cycle within the first few days of this coming week. Yet the 20MA of $563 (soon $570) will likely hold, and then we can make a challenge for the mid 600s by mid April.

All things considered, AAPL is already at 'fair value' under my rules, but the market that we exist in may easily take AAPL to the grand $1000 level within the next 6-18 months. To many readers, that may sound like the sort of crazy talk you'd hear on one of the financial clown channels.

As a Permabear, I can only note again, that I could list off a hundred or so companies that are probably 75% over-valued, but I'll leave that for another time.

In the meantime, anyone shorting the worlds greatest tech' growth stock, would do well to have a stop in place. After all, being short AAPL all the way up to $1000 would not be the best of positions to have in ones trading account.

Good wishes

           never bought a single AAPL product....(although that IPAD'3 sure looks kinda nice, just a shame the stupid design does not allow user-replaceable batteries..urghh!)