Apple Stock (Buy, Sell or Hold)

If you have been living under a rock for the last couple days you would've not known that Apple will be releasing iPhone today. Since Apple announced they will be coming out with the iPhone the stock has been up over 30%--which is the exact % Apple is up in my portfolio. So here's how I think the stock is going to play out--since we didn't see a huge runup in the shares in the last couple weeks of the release date we might see Apple hit fresh 52 week highs based on the iPhone selling out at some stores. However, this will be short lived as I think the stock will trade between 110 - 140. Heading into next quarters conference call I think that stock will sell off as analysts still try to figure out how to price in this new revenue from the product. I will most likely add some more to my position at this time. After that I couldn't tell you...I do know that christmas season will be a big teller to how popular this product is so expect within the next six months to be very violatile. One more thing alot of analysts will be looking to see how the iPhone affects the iPods #'s if we see iPods falling off this could be potentially bad. Here is a writers take on Apple & iPhone...

500 phone, $200 stock Right now, analysts on average expect Apple to earn $4 in fiscal 2008. Now let's figure that the analysts have blown it again by the average amount that they have been mistaken over the past four quarters, which is 27.5%. So you add 27% to the $4 consensus number to get an estimate that we'll just call $5 to keep it simple. If that's the right number for 2008, then the stock is currently trading for just 23 times our new estimate. That's pretty darned cheap for a company that has been growing at better than 30% for the past few years and is actually on the verge of a whole new product cycle.
If you apply the company's current 37 price-earnings multiple to $5 you get a target of $185. Which is not bad, but then if you are looking out two years, you need to speculate that Apple will grow by another 30% over the next 12 months. So add 30% to $5 to get a 2009 estimate of $6.50. Multiple that by 35 and you get an 18-month target of $240, or double the current price. Shares have doubled in the past year, so that's unlikely but not totally outrageous.
Although that sounds like a lot, and it is a lot, it's a target that only assumes the company's current pace will continue and does not include any possible new devices or product cycles -- or, to be fair, any risks like the potential for a total meltdown in consumer spending. So I'll ratchet down my target, and add more time, to account for any mischief and overheated assumptions out there. Nibble on Apple now for my 18-month target of $200, but add materially if and when it trades down into its 10-month moving average to around $110-$115 over the summer.