Apple Stock: Is Now the Time to Buy or Sell?


Over the past 52 weeks, Apple stock has traded in the range of $14.68 - $26.17. Currently, it's trading at $17.11.

Remember back when Apple stock was way undervalued after the great fall of 2000? Its assets and brand name were valued at scarely anything by the market, and its stock reflected a value per share only marginally more than its net worth in cash (at the time, over $3 billion).

This year, it's been sitting (fairly) comfortably at over $20, with a number of analysts originally setting a target of around $30 per share for 2002. While analysts have revised their guidance in light of Apple's earnings warning Tuesday, you can bet - $17.11 if you like - that, while it might not have bottomed out, Apple shares will rise appreciably between now and MacWorld New York in July.

While this is typical of Apple stock - "sell on the rumor, buy on the news' - the company's shares have taken a significant hit this week, given that earnings warnings have been a relative rarity from Cupertino since late 1997.

So, if you have some spare folding in the knot of your handkerchief, is this the time to buy?

I would say yes, given Apple's profitable performance in recent quarters, as well as its strong model line up. There's nothing wrong with the fundamentals at all (axtually, I'm also spending other people's money on Rupert Murdoch's News Corp shares - we made a (minor) killing after 1990 when they nearly went broke then went to $26-something).

Not long ago, investors who bought at 12s and 14s did pretty well when they sold at 20s. Then, of course, there's the long, long list of Apple executives who didn't buy shares at all, but managed to sell them for a tidy profit recenrly.

Now, some of you may be thinking, "Why should I buy stock to fatten up the portfolios of fat-cat Apple executives and add to their fat profits?"

Why indeed?

Because, if you don't, we'll have to endure 12 months' worth of "Disney Will Buy Apple/Sony Will Buy Apple/Compaq Would Buy Apple If They Had Any Money, Sense, Business Acumen Or Executives Left And Weren't Owned By HP" stories. And none of us would want that, would we?

Rather than becoming alarmed at the stock plunge, we should perhaps view tech stocks as settling at something like their real value. Adobe was punished recently for relatively insignificant shortfalls, but this probably indicates the psychological problems the market still has with tech stocks. It's worth noting that Apple yields maybe 8-11 cents per share, which is not exactly what some investors would call 'shareholder value'. Unless, of course, you happen to be one of those 'optional' shareholders who happens to work for the company that issued them (or, in some cases, used to).

After all, crashes, whether of computers or stock markets, have to be in distant memory before they eradicate the impression of unreliability.

Disclaimer: The author owns many Apples, but no Apple stock. He also owns up to possessing one share in Microsoft, which he got out of an Office box when no one in the store was looking. Sadly, it's depreciated somewhat since then.