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August 16, 2007

Brief Apple Update

I have been waiting to round out long positions in Apple and build new positions for clients. SInce the stock brokedown and the market collapsed, I had been targeting $125 for Apple but decided to wait and with the stock decisively breaking that level I decided to make the move. I am optimistic about near-term trends in Mac sales. I am counting on an iPod refresh for the holiday season. I believe those who are saying iPhone sales are on track.

The stock is trading at 27 times 2008 estimates. It is a little cheaper adjusted for $15 per share in net cash on the balance sheet that has been rising by over $1 per quarter. Given my comfort with a 20% EPS growth rate for several years off the FY07 base, I think the valuation is reasonable. I know that the technicals stink and that the stock tends to move in major multi-month cycles but sometimes value wins out over emotion.

Posted by Steve Birenberg at August 16, 2007 02:40 PM in AAPL