When Will Apple Become the Forbidden Fruit?

Don’t you get tired of reading about Apple? Apple reminds me of the kid in school who sits in the front row and raises his hand as high as he can to answer every question. Or that guy in corporate meetings who thinks every idea is brilliant and innovative and volunteers to head the committee to study it.
But at some point that guy falls out of favor. Like my old pair of parachute pants, Apple can’t wow us forever. When will Apple become the forbidden fruit that investors avoid? As much as companies like RIMM and Nokia dream of being the worm inside the Apple, I wouldn’t be basing my next family vacation around my Apple short positions. Once again, the company everybody loves to love blew away the street.

Headlines & Antennagate

Earnings were $3.51 per share compared with $3.11 a year ago, and revenues were $15.7 billion, up from $14.75 billion one year ago. Forward management guidance is $3.44 versus $3.82 consensus. Revenues were $15.7 billion while the street expected $14.75 billion. Q3 has not been an impressive earnings season for Wall Street so seeing these numbers is just another reminder why Apple remains best of breed. Not even the now dubbed Antennagate that caused Apple to actually talk to the press can tarnish their reputation.

It Get’s Better!

Mac revenues grew 33%, IPhone sales were up 61% year over year to 8.4 million units and IPad sales totaled 3.47 units. IPods saw an 8% decline to 9.41 million units, the only one of Apple’s major products that saw a decline but if IPhones are up 61%, would we be concerned if IPod sales were down even more than 8%? Don’t we call that upselling? (For those of you who haven’t sunk your teeth in to Apple, IPhones have an IPod built in) Margins were down slightly year over year to 39.1% from 40.9% but this was largely caused by the IPad. It’s a decline that will pay off as the IPad continues to penetrate the enterprise market. Apple’s forward P/E is sitting at 15 times earnings (13 times earnings if you take the cash out) which is only slightly higher than the computer hardware sector but lower than the overall technology sector at 21 times and with all that cash on hand, is there any reason not to think that this stock isn’t going to $300?

The “Apple” of our Eye?

As much as we quickly grow tired of the chronic overachiever in our real lives, as investors, they make us money. It’s hard to find a reason why Apple isn’t the best tech stock out there right now and quite high on list of the best investible companies, period. I think this this company will be the apple of investors’ eye for many more quarters. Along with their balance sheet, “the cool people own apple stuff” persona doesn’t hurt either. Attention Analysts By the way, let’s get all of the Apple analysts in a room and let them know that it’s time they quit falling for the same conservative guidance each quarter. I don’t think a few million cell phone cases are going to have much of an impact on a company with more than 4 billion in cash sitting in the bank. That extra $1 billion they brought in this quarter will more than cover it.

The Forbidden Fruit?

I would be a buyer of Apple today but beware Apple, like certain sports figures we know, history has proven that a person or company’s downfall can be the ego. Did you really think we would fall for the “whoops, we never noticed that the signal bars aren’t displaying properly” line? And let’s not forgot that the next best tech gadget will be here before we know it. Did you read about the $35 tablet? Like the old story goes, one wrong bite can spell disaster so as investors we must remember that even the best company will eventually hit a rough patch and not necessarily for fundamental reasons.

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