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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!