When it comes to Apple Inc. and Wall Street, I don't get it. These last few weeks have seen a precipitous decline in Apple shares, from a high right near $203 to a low of $171.
The fall in Apple shares follows a general downdraft in all kinds of tech, yet many experts both in and outside the company I'm talking to have continued to harp on the "fundamentals" that got Apple to those lofty heights to begin with. Which only seem to continue.
Yet the shares continued to fall.
And here we are, on the eve of Macworld,and there are a slew of new research reports out on Apple over the last couple of days and the shares are on the move north for a change. You'd think that the reason for today's gains would be simply out of valuation alone; that Apple shares had fallen so far so fast that they present a nice "buy" opportunity today. But that's not the case.
Instead, Bank of America raises estimates on Apple because of strong PC demand, strong sales of the new operating system Leopard, "particular strength" in Mac sales, etc. BofA now anticipates $1 billion more in sales in FY2008 and 17 cents more in earnings per share, from $4.87 to $5.04. The company maintains its $200 target.
Morgan Keegan sees "more margin upside" thanks to higher iPod average selling prices; continued declines in memory prices should also help Apple squeeze more dollars out of every Mac sold. So Morgan raises its fiscal 2008 EPS estimates to $5.29 from the $5 it had expected. JPMorgan remains neutral on the stock, largely because of valuation.
RBC refers to what it expects will be "ginormous holiday Mac sales," with estimates topping a staggering 2.5 million Mac sales on the quarter, which would break the previous 2.2 million Macs sold record from the prior quarter. RBC is also raising estimates; a half-billion dollars on the topline for 2008, and 3 cents on the bottom line. The firm re-iterated its $215 target.
Bear Stearns sees things quite differently, voicing concern about "weaker consumer demand on iPod, iPhone and revenue in US and Europe." The firm is lowering its Apple target from $249 to $233, but that $233 is still a healthy upside to today's $177 price.
Again, we can talk back and forth about valuation and macro-economic forces that could take their toll on a premium, consumer oriented family of products like Apple is trying to sell. We can focus on the breakdown in discussions between Apple and China Mobile (though I hear the breakdown is only temporary, that negotiations will resume so Apple can break the iPhone into the Chinese mobile market); we can focus on the new competitive threats from Zune, or how AppleTV isn't catching fire yet.
But read the analyst comments again. And again. Listen to what the company says tomorrow and the longer term trends that Steve Jobs points to. And remember the position in the marketplace Apple enjoys.
Even the so-called "negative" comments about Apple seem to be positive, and to me, Bear Stearns is missing the power of the Mac momentum. It would seem many investors these last few weeks may have also. Focus on the fundamentals; Apple still seems very much like the real deal.
Questions? Comments? TechCheck@cnbc.com