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November 9th, 1999

[11:00 AM] Salomon Smith Barney Cuts their Rating on Apple to Outperform from Buy
by Wes George

Solomon Smith Barney has downgraded Apple's stock today after the stellar run-up in the stocks price over the last few months. The company downgraded the stock from a Buy to an Outperform based on its increased valuation. Currently, Apple has a price to earnings ratio (P/E) of 26.12 as of press time.

Apple's (AAPL) stock has advanced strongly since the low of $58 on Sept. 29th. Yesterday, Apple reached $97.7 intraday, up almost 20 points in the last five trading sessions.

Some profit taking was due once the euphoria over the recent dual judgements--iMac rip-offs banned by a California judge and the Findings of Fact against Microsoft-- subsided.

The Mac Observer Spin: Salomon downgrade of Apple from Outperform to Buy "based on valuation" is ludicrous. Apple still trades at a PE ratio of about 28. The average PE ratio for the PC vendors is closer to 43. Gateway PE is 54 and Dell's is 63. Even sad Compaq has a PE or 32. Apple is undervalued even if it has "gotten ahead of itself" as they say on the street.

Apple's long term trend is steeply higher. As famed investor Fayez Sarofim said last month to Money Magazine, "The biggest mistake is selling your winners. You should hold on to the ones that have done well and sell the others. It's the exact opposite of what most people do." Apparently, "most people" includes Salomon Smith Barney. Expect a volatile ride into the triple digits by the Christmas season.

Today Apple was off by as much $7 in early morning trading but is now coming back. The broad based sell off in technology stocks this morning is a healthy rest for the Nasdaq which has seen a rare 7 consecutive all times highs. Microsoft is down by more than $3 at this writing.

Blue World Communications



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