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Demise of AAPL?

posted Mar 23, 2013, 7:46 PM by Mohit Kumar
Last night, I counted the number of emails I received over last 2 months regarding AAPL and our stance on it. I received precisely 41 unique queries, which extended to 146 email exchanges! Hence, it seemed appropriate to wind up this quarter with a note on AAPL!

The giant fumbled stunningly, down nearly 40% from its highs in September! It is amazing how investors could turn hostile in a short period of time! So what did AAPL do wrong?  Well, it sold more than 74 million iPhones, iPads, and iPods in a single quarter; delivered record revenue of $54 billion and net profit of $13 billion; and beat Wall Street's earnings expectations! But these numbers failed to beat the exceedingly growing expectations set in the mind of investors, who would rather point out the drop in sales of Macs and Ipad and a lighter revenue. And not to forget the exceedingly high competitive pressure from the likes of Samsung, Amazon and Google. Yes, these are all real threats and worries, no doubt. But, the current valuation seems to assume that AAPL is going to sit back and watch the competitors eat its market share? Why is the market ignoring the possibility of yet another disruptive gadget sooner or later? (iWatch or iTv or whatever)? And what about the nearly $140 billion cash pile which is expected to grow up to $170 billion by the end of the year! I believe that the market is not willing to look beyond a quarter or two. Although, I am aware of the threats AAPL faces and that it is no longer a granted winner, the current stock price surely looks like a mismatch from its fundamentals. The short sighted analysts may have lost their love for AAPL, but we remain cautiously bullish on AAPL!!

Stay tuned for our final recommendation for the quarter, next week!

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