|by Wes George
Buy AAPL or get left behind for good!
September 7th, 1999
"…for the first 40 years of computer science, we have been preoccupied with catering our technology to what machines want. We design systems and subsystems individually and then throw them at the public, expecting people to make the different components work together."
Michael L. Dertouzos in the August, 1999 issue of Scientific American
Stunningly, Apple stock is in the low $70s, and as robust as it has ever been, ready to trade well beyond its all time high of $73.25. The last time AAPL traded at these lofty levels was back in 1991. It's truly an awe inspiring moment, one that brings tears to the eyes of many long time Mac followers. The Apple comeback is now virtually complete and the entire world is ripe for conquest by the Mac.
I would like to thank all the men and women of the Apple Corporation for the heroic job they have done through the past years of darkness, always keeping the faith and staying focused on the light at the end of the tunnel. Without their talent and commitment to not merely a computing platform, but also to a philosophy of being and a way of seeing, the world would be a lesser place today.
And thanks to Steve Jobs for coming home and wielding a level of visionary statesmanship that hasn't been seen since Franklin Delano Roosevelt.
To all those early Apple investors who bravely stayed long through the thick and thin to see Apple last week set an all time record high… Congratulations! Patience is a virtue that when rightly positioned reaps its own reward. A page of history has been turned. Let the new era begin!
Apple covered the ground between 50 and 70 in just 42 days. Amazing what momentum can do for you. Don't let your fear of heights beguile you into taking profits prematurely. In fact, the actual price of AAPL isn't steep at all, just the speed of the current uptrend. The recent price advance is likely to hold solid for both technical and fundamental reasons.
Technically, old resistance, even ancient resistance from 1991, once overcome becomes support. The recent highs were accompanied by massive volume, and a steady upward trend in average volume has been going on for months now.
Fundamentally, Apple's earnings per share are about six times that of Dell. If Apple stock was valued at a level comparable to Dell's price to earnings ratio of 75, AAPL would cost about $276 per share! If Apple had Gateway's PE ratio of 38, AAPL would be going for $142! Hello! Perhaps, that ought to be AAPL's price target 12 months out!
For the risk adverse long-term investor, as well as the money grubbing speculator, Apple is the best value for your money in the computer hardware sector.
Why is Apple's PE ratio so low compared to the rest of the industry? This is a question that Apple investors around the world have been asking for the last year. There were many reasons, but most of them are moot points by now. The stock price is playing catch up to the terrific brand name that Apple is. Investors will continue to flock towards the safety of the quality names that are undervalued, especially in the coming months of expected market volatility. AAPL's PE ratio could easily double by Christmas.
Clearly Apple has just recently passed through an important phase shift in investor's eyes. It's rather disorienting to those of us that have followed Apple for years dogged by skeptical analysts, fading developers and PC-centric rivals joyfully pre-announcing Apple's imminent demise.
The Mac faithful will have to psychologically adjust to no longer being the underdog, the disenfranchised minority in danger of extinction. Apple investors may find themselves in a situation similar to that of MSFT shareholders in 1990. We'll have to become less polemic, more gracious, and even forgiving, to Apple's vanquished detractors. No longer shall I dis' James Poyner as a "moronic PC-borg," but merely as a misguided analyst in need of our help. Perhaps we should all chip in and buy him an iBook, which will come in mighty handy once CIBC Oppenheimer finally tells him to hit the road.
The amazing resurrection of Apple as a force to be reckoned with has been evident for more than a year now to those watching closely. The most frustrating aspect was waiting for the bulk of investors (who still check the status of AAPL through PC beige boxes) to rip the blinders from their eyes and see the obvious. Alas, now it has happened.
Expect strong earnings surprises for this quarter and the next to fuel and support the steep upward ascent of the stock price. How high can AAPL go? I don't have a clue, but analysts are scurrying to raise estimates, mutual funds are piling more AAPL on their plates like hungry guests late to the buffet and the investor stock boards are full of chatter about triple digits and stock splits.
Never fight momentum. Never deny the market its will. AAPL is on its way up and outta here. Buy on the dips, they'll be shallow and few. AAPL has shown, due to its extremely undervalued position, it will perform well through both market corrections and rallies alike.
As I mention last week, I was foolishly shaken out of AAPL and left behind a few weeks ago. Since then I have been waiting (remember, patience is a virtue!) for a re-entry point. I hope to buy back in on the next (read: any) retracement. Heck, I may just buy Tuesday morning and get on with it! I don't offer this as advice, but as a disclosure of my own, often misguided, trading strategy.
Your comments are welcomed.
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Wes George writes about the financial side of being a Mac nut. Wes has followed Apple's finances for the last 7 years and comes to The Mac Observer every Monday to tell all about his opinions. He is, in his own words, "inordinately fond of money." If you would like to write Wes, make it nice. Someday you might own a company that has something to do with Apple, and Wes will probably still be writing for The Mac Observer...... On the other hand, Mr. George is known to love a rousing, hair-raising debate, so send him your worst!
Disclaimer: This column is for informational and entertainment purposes. While Mr. George may be sage indeed, his writings can not be construed as a solicitation to buy, nor an offering to sell any particular stock. As with any trading in the financial markets, you must use your own judgment to make the best trades that you can. Neither The Mac Observer nor Wes George may be held accountable for trading advice.