Opinions about Apple Inc. (NASDAQ:AAPL) are flying their way around the blogosphere this morning, as shares of the tech giant are down more than 10% on the heels of a mixed first quarter earnings release. Apple slightly missed on the revenue side yesterday (see our recap), and while it did beat the Street’s EPS estimates, the company did issue Q2 revenue guidance 5-10% below analysts’ consensus of $45.6 billion.
Courtesy: Apple Inc. (NASDAQ:AAPL) Press Info
With this in mind, Jim Cramer was on CNBC this morning, calling investors’ sentiment toward Apple “not fair.” More specifically, Cramer argued that even though the company’s first quarter results weren’t a blowout, the valuation is experiencing a “reset.” Here are the highlights:
“The company’s conference call was radically opposite of what everyone was thinking […] the analysts were viciously, viciously trying to figure out […] what do you pay for a company with waning growth, what do you pay for a company that’s not as loved by the customer anymore? And the answer is: well we gotta pay what we pay for Intel, what we pay for Cisco, what we pay for Microsoft.”
On the subject of Apple Inc. (NASDAQ:AAPL)’s guidance, Cramer said that “This is one of these moments, where you’re going through it and you’re trying to figure out ‘what were they doing all along,’ and the answer was they were sandbagging.” For the stock to meet the expectations of bullish investors, Cramer mentioned the following “Look, this company needs OMG and it needs it now […] we need to get beyond the four walls of the canvas here.”
Apple Inc. (NASDAQ:AAPL)’s next ‘OMG’ moment will probably not come next quarter, but there’s a chance that it could come by the end of 2013. Aside from the expected new iterations of its iPhone and iPad models, many Cupertino optimists are hoping for an entry into the smart TV space. We’ve discussed before how an ‘iTV’ could add at least a 5% upside to Apple’s bottom line this year.
Likewise, a deal with China Mobile Ltd. (NYSE:CHL) to sell the iPhone 5 (or even the iPhone 5S) in China would serve as another “carrot,” so to speak, pulling shares of Apple Inc. (NASDAQ:AAPL) higher.
Now with $137 billion in cash, though a significantly smaller portion is actually available for immediate use, Apple can also boost its dividend payout. An improved yield will likely drive more income-seeking investors into the stock, but for all intents and purposes, Apple Inc. (NASDAQ:AAPL) may need a new, truly revolutionary product launch to be properly appreciated by investors.
At a mere 9 times earnings and a PEG near 0.5, AAPL shares are clearly cheap, but that’s been the argument to buy ever since the stock began its fall from $705. It’s important for investors to realize that not all of their peers follow the value-based mantra, and some are likely just looking for a new growth platform, whether it’s a TV, an expanded presence in China, or even a smartwatch.
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Disclosure: I have no positions in any of the stocks mentioned above