Apple Inc. (AAPL): unstoppable!
Apple Inc. (AAPL) is one stock we wish we own more. As we watched as this stock climbed from the low 50s (May, 2006) to its current level, we continue to be amazed at the resiliency of this company. Arguably one of the more innovative companies in the Silicon Valley, AAPL’s business model is straight forward and easy to understand. Unlike Google (GOOG), we can easily explain to our mothers how Apple makes money.
Through the iMac, iTunes, iPod, Mac notebook and now possibly an iPhone, Apple continues to innovate; the market can’t get enough. In business, it’s quite unusual for every product to enjoy this level of success. Then again, AAPL does not appear to be just another company. Apple’s iTunes and iPod continues to dominate the market even as large competitors such as MSFT and YHOO decided to join the online music business. Apple continues to enjoy their first move advantage despite increased competition. It appears there is no stopping this company. Even a report of stock options backdating scandal did not do much to weaken this company’s stock. Steve Jobs himself admitted to a large role in this illegal practice, but yet, this company continues to roll.
Obviously, a hot company like AAPL is not cheap in terms of their stock valuation. Trading with a market cap of 74 billion, P/E of 38 (2x higher than industry average) and EPS of 2.26, AAPL is a premium stock with much higher growth rate than many of its competitors. However, there are frequent weaknesses and opportunities such as the recent report Steve Jobs might be forced to leave due to the options scandal. That day the stock dropped 3 points, but quickly recovered as investors realized it was non-revenue impacting matter. Our recommendation is to buy AAPL whenever possible, while weak days are far and in-between, there are opportunities. At $86 per share, our current position is to remain on the sidelines in the hope for weakness in the coming months. Therefore, we are issuing an entry price for AAPL is $80 per share. To buy the stock at this level represent too much risk as it is too close to its 52 week high.
Good luck and Happy Investing.
