3) There are other potentially huge Tech winners emerging. As just one example, I’d say that FB is starting to garner some serious institutional buying and this buying is in lieu of former AAPL buying. I just tweeted that I can see a new “horsemen trade” in tech emerging. Fusion-IO, Inc. (NYSE:FIO), Palo Alto Networks Inc (NYSE:PANW), Splunk Inc (NASDAQ:SPLK), Facebook Inc (NASDAQ:FB) and maybe Infoblox Inc (NYSE:BLOX). Right now I’m going to say that FB FIO and SPLK are in that horsemen group for me. Thus when we get real risk-on again look for the true growth buyers to seek these names and others like them, as these are the new 35-60% YoY growers. And that is the growth rate that the growth funds seek out.
4) Fiscal Cliff proxy. What I mean here is that Apple Inc. (NASDAQ:AAPL) is essentially the fiscal cliff proxy trade. While not perfect, it’s darn close. When fiscal cliff seems to be “solved,” AAPL has been very strong. When it seems most at risk of “going over” the cliff, AAPL has had its worst days.
Bottom line, all this adds up to largely structural selling and very little real fundamental support. Is AAPL’s growth slowing? Yes, but it has for a couple years and I’d add the growth rates in EPS, cash and or even revenues is still extremely divergent compared to the 7-8 PE net of cash and that sub 0.50 PEG level. As I detailed a few AAPL notes back, this is a stock that will in 3-4 quarters be sitting on something like $200 billion in net cash and around that time will be producing $55-60 in EPS… actually that number is low as I’m at $65 by then. So let’s do a quick table:
Apple Inc. (NASDAQ:AAPL) value net of cash at $55, $60 and $65 in EPS (assumes current price):
1. PE net of cash at $55 = 9.7 and 5.8 net of cash
2. PE net of cash at $60 = 8.9 and 5.35 net of cash
3. PE net of cash at $65 = 8.2 and 4.93 net of cash
Now I don’t have to do a double take as I’ve analyzed AAPL PE’s net of cash like this for years after significant price drops. But I think many will do a double take. Also, these valuations make even less sense when one adds in a div. yield, which is above a 10 year Treasury and many other factors. Effectively, AAPL has just priced in a negative to Zero growth scenario, even though if they get to $60 in EPS that will represent 35% plus growth. Even though I’ve cooled on AAPL in the last year, I don’t think they are headed into a Zero to negative growth scenario in the next 1-2 years. In fact, if they do anything intelligent with the cash at all they can nearly guarantee solid future growth. And therein lies the biggest bearish counter. The assumption that AAPL could become a Sony or Research In Motion Limited (NASDAQ:RIMM) or Nokia Corporation (NYSE:NOK) (or the Apple Inc. (NASDAQ:AAPL) of old), completely ignores the greatest level of balance sheet cash ever generated.
