Apple Crush

The news just keeps getting worse for Apple (AAPL) with all the negative rumours being confirmed by the top-line warning announced last night. In my last post on AAPL, I ruminated that the stock could fall as low as $160. Well, it was trading below that figure prior to last night’s warning and it looks set to possibly test $140 today. The only bright side of the announcement is that it quantifies the bad news which is the first step towards reaching a bottom. The enviable round of analyst downgrades means the next few weeks will likely be choppy for both AAPL and the market.

In the interim, I quickly revised some numbers in my model, as below.

click to enlarge

Based upon my historical forward multiples excluding cash, whilst reverting to a straight average multiple of 9 compared to an increasing multiple (that was in another era now!), my new estimate of how low AAPL can go is $115 per share, a near 30% drop from last night’s close.

click to enlarge

Whether I will be a buyer around the $120 level will depend upon what the overall market is doing. Best to wait on the side-lines for this drama to unfold.

One response to “Apple Crush

  1. First of all, happy new year!

    Second, it looks like Tim Cook upset the Apple cart (pardon the pun). Good news imo is that servies are growing faster (which should help them going forward given that the base of installed devices won’t grow that much), so The Oracle or one of his sidekicks had the right intuition once again.

    Given the outsized weight of AAPL in the S&P this drop has some serious consequences (reflexivity and all). Right now it looks like a nice exercise in knife catching, something I am not proficient in…

    Eddie

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s