Apple: Wall Street's Ignorance At Large Again
by Sarah Maller
Introduction:
More than 40% off of its high, what once seemed like the investment of the century has transpired to some as being an old cigarette butt with one or two puffs left in it. Apple (AAPL) soared tremendously over the last half decade, becoming a seven bagger over the course of five years. Like many other companies in the technology sector, innovation is vital to the protection of a moat. The iPhone in 2007 was an incredible breakthrough, and practically dominated the smartphone market. Now, five years later, a multitude of competitors have emerged, and the big debate is whether Apple has lost its innovative edge, if sales are declining, and whether Google's (GOOG) Android devices and maybe Microsoft's (MSFT) Windows mobile devices will eat too much into Apple's growth opportunity. There is also the colossal question about whether or not China Mobile (CHL) will collide with the Apple phone line, and whether the iPad-mini is eating into margins, to be exacerbated further by a possible low cost iPhone. Although in the land of technology, competition adapts quickly and a few years from now can be viewed as the distant future, Apple represents a compelling risk-reward opportunity at these levels based on my analysis. Often, evaluating a firm through a discounted cash-flow model and re-engineering its stock price can provide a better picture of a company's investment potential on a risk-reward basis than even the most clearly written prose. read more »
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