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Apple Inc. (AAPL) Isn’t Dead, Is It?

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Apple Inc. (NASDAQ:AAPL)Is anyone really that surprised to see Apple Inc. (NASDAQ:AAPL)’s stock rally the way it has after it announced its second quarter earnings and upcoming plans?  It always amuses me when the market, driven in the short term by the whims and subjective feelings of its uninformed participants, overreacts to bad news and writes a largely successful company off as a dying species.  This is exactly what happened over the past 7 months as Apple Inc. (NASDAQ:AAPL)’s stock plummeted nearly 77% (from September 2012 to April 2013, pre-release).
Apple Inc. (NASDAQ:AAPL) found itself drowning in a sea of negative speculation due to a slowing growth rate and increased competition.  I’m not saying that such concerns are invalid ones, but a 77% drop for a company that has historically proven itself as a leading innovator and competition crusher?  A decline that significant for a company such as Apple simply reeked of an undervaluing due to investor overreaction.

This is one of the reasons wise investors rarely, if ever, invest with a short time frame in mind, selling off like mad men the minute prices start to fall.  Investments are meant to be long term, and therefore able to ride the ebb and flow of the whimsical marketplace. And this is why Apple Inc. (NASDAQ:AAPL)’s second quarter rally doesn’t shock me.  The naysayers of late never really had a solid limb to stand on.  Those wise investors that held their stock (and the truly wise ones that instead of selling when the price fell just bought more shares) are now laughing at all the speculative fools that opted out.  Why are they laughing, you ask?  Well in case the thrilling news of an expanded stock buyback and dividend increase wasn’t enough to make them laugh, here’s another reason.

Apple never really faltered
The overwhelming decrease in price that haunted Apple Inc. (NASDAQ:AAPL) for seven months was nothing more than an unwarranted and unnecessary panic.  I know you can’t predict the future based on the past, but you can’t ignore it either.  The world’s most sophisticated stock valuation models rely in some degree on past performance to forecast future growth and cash flow.  Therefore, in order to validate my argument, let’s take a look at Apple Inc. (NASDAQ:AAPL)’s impressive credentials in comparison to some of its closest competitors, Google Inc (NASDAQ:GOOG)Hewlett-Packard Company (NYSE:HPQ), and Research In Motion Ltd (NASDAQ:BBRY).

AAPL
GOOG
HPQ
BBRY
Rev. Growth (5 Yr. Avg.)*
43.66%
21.92%
1.98%
14.94%
Gross Margin (5 Yr. Avg.)*
42.90%
67.80%
26.30%
44.50%
Return on Equity (TTM)**
38.41%
16.36%
-41.00%
-6.42%
Price/Earnings (TTM)*
9.20
24.10
N/A
N/A
Price/Free Cash Flow (TTM)*
9.40
95.90
5.10
9.10
*Data obtained from fool.com
**Data obtained from finance.yahoo.com
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