Originally Posted by Asherian
It's really simple. You don't buy a stock based on what it did in the past or even what it did today. You buy a stock for its future performance.
It's quite obvious that the market doesn't have much faith in Apple without Jobs, and the underwhelming launch of the iPhone 4S didn't help. And yes, I'm well aware of the spin of the fastest selling iPhone ever -- a complete miracle considering it went on sale in far more countries the first day than the iPhone 4 did.
The percentage growth rate AAPL has been on has been stunning, to be sure. But the low P/E indicates that the market, as a whole, thinks the ride is over and that kind of growth is not going to continue. Especially sans Jobs.
Statistically, AAPL is undervalued for its current earnings. No doubt. But I know a great many people who now won't touch AAPL stock.
The future of a stock's performance is of course based on past performance, anyone who does any sort of prognostication in any field will confirm that - the stock market is a major proponent of that simple fact, and you can't simply reverse the whole underpinnings of the financials market to suit your opinion.
The iPhone 4S was anything but underwhelming and calling out wider delivery to other countries is rather silly. Would you have rather they continued to ignore or delay these other countries for the mere convenience of being same/same for comparison purposes to the iPhone 4 launch? That requires an absurd level of denial. If anything the market would (under other circumstances and with another company perhaps) have REWARDED such strategy.
The market as a whole is not trading in AAPL stock, there are specific reasons that the P/E ratio is being suppressed. Most other companies in the same category are underperforming and Apple is the only one that is overperforming. If you look at the primary stockholders for AAPL, you will see the actual reason behind the supression of the P/E ratio. The primary shareholders in Apple stock include FMR, Vanguard, State Street, T. Rowe Price, BlackRock Institutional Trust Company, Capital World Investors, Capital Research Global Investors, Invesco Ltd., JP Morgan Chase, Northern Trust Corp, Fidelity Contra, GFA, Powershares, and College Retirement Equities. 70% of Apple stock is held by these institutional shareholders. Understanding that, it is simple to look for them to attempt a "slingshot" effect by supressing Apple stock until the P/E ratio pressure is high enough to push it into rapid decompression effectively driving the valuation up to a significantly higher hold point. At which point they can begin doing the same thing all over again. These institutional investors are playing with Apple stock because it is the strongest performer in the market among the large cap set.
So the "great many people" you know that won't touch Apple stock are going to be very chagrined when these investors release the pressure on Apple stock and let it snap up to the next hold point.