Apple Inc. (AAPL): Cut Losses, Hold, or Double Down?

Page 1 of 2

Apple Inc. (NASDAQ:AAPL) investors are in a hole today after the company’s quarterly report sent the stock down about 10%. The tech company is now down about 13% year to date and about a third from its peak in September 2012. Though it’s still up 22% from a year ago and almost 300% in the last five years, longs are still starting the year with a paper loss. Apple’s quarterly report was actually not bad in terms of earnings- while the raw earnings per share figure was down slightly, the quarter was 1 week shorter than last years’ and so the rate of earnings was technically higher. There were two primary issues: product unit sales were generally below expectations, and gross margins were unimpressive- analysts have worried that despite the power of Apple’s brand, competitive products such as the Android line will eat away at margins.

David Einhorn

With the decline in the stock price Apple Inc. (NASDAQ:AAPL) is currently priced between 10 and 11 times its trailing earnings. We think that multiple implies a market expectation that earnings will decline going forward. That is certainly a possibility, but long term we like the tablet and smartphone markets. In addition, this earnings multiple doesn’t account for the massive amount of cash Apple has on its balance sheet; that figure (including long-term and short-term marketable securities) is up to $137 billion or about a third of the market cap. At an enterprise value of about $300 billion, Apple Inc. (NASDAQ:AAPL) is valued at only about 5x trailing EBITDA. Sell-side expectations are still being updated in the wake of the report but it appears that analysts remain bullish on the company.

Apple Inc. (NASDAQ:AAPL) had been the most popular stock among hedge funds in the third quarter of the year, with 146 funds and other notable investors in our database of 13F filings reporting a position (see more of the top ten stocks). Greenlight Capital’s recent investor letter- from before the earnings report- showed that billionaire David Einhorn still liked the stock and that it was still one of the fund’s five largest disclosed long positions (find more of Einhorn’s favorite stocks). At the end of the third quarter Apple Inc. (NASDAQ:AAPL) was one of billionaire Dan Loeb’s favorite stocks as well, with Third Point’s 710,000 shares being a 67% increase from three months earlier (check out more of Loeb’s stock picks).

Apple looks cheap compared to peers in the technology sector:

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!