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apple stock bubble

i love apple products and own apple stock, and also don’t know much about investing. but i do know that apple’s stock is on a crazy rise, and while that makes me happy for both my investment and for apple, i’m afraid of it being in some sort of mystical apple is wonderful bubble, and therefore its inevitable drop. it’s more than double what it was at the start of the year, and it keeps rising b/c of the ipod. analysts keep raising expectations of apple’s earnings based on the ipod, and i have to wonder what happens when the personal music player market starts to get saturated. only so many more ipods can be sold, you know? furthermore, analysts have been inflating apple’s worth by raising projected earnings beyond even what apple projects, thereby artificially raising apple’s stock and setting it up for a fall. that happened at the end of last quarter, but obviously apple has rebounded. plus there are some really great new products on the way, what w/ the rumored new mac-mini and intel products.
still, i watch the price rise every single day, and i worry…

Categories: tech
  1. December 13, 2005 at 8:35 pm

    all true stuff. i would take some of your $ off the table. great stock to own, but kind of late to buy it now. depending on how well diversified you are and what your tax bracket is this year, it may be a good time to sell some shares.

    gotta love a company that generates $2.5B in operating cash on $14B in revenue. somehow institutions are not so nervous–73% of the stock is held by institutions and a measly 25M shares are short (out of 842M shares outstanding).

    it’s hard to classify apple, though, which makes evaluating their stock difficult. their P/E multiple of 48x is ridiculously high, but it’s not really fair to compare them to microsoft, dell or HP (all of whom typically trade at 25-30 times earnings). apples PEG ratio (which you want to be as low as possible) is close to 2.0, as is the aforementioned competitors. one could say that you should have similar valuation expectations, in which case one should expect a similar multiple.

    then again, apple is truly in a class by itself. certainly not a personal computing company anymore.

    most analysts are saying to hold.

  1. December 21, 2005 at 8:25 pm

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