Apple's Mixed Investor Sentiment
Ishfaque is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) has taken its investors for quite a rollercoaster ride. The stock price of the iPhone maker has flirted with the $700 mark, and is now down substantially and is hovering around the $450 mark. Momentum investors have dumped the shares in large numbers amidst worries of margin contraction, and a slower pace of innovation.
While it’s never a good idea to follow marquee investors blindly, it’s a good idea to engage in "fact-checking" with leading investors and thought leaders once in a while. Investors should do their own research on Apple before jumping on the boat, and even more so, due to the uncertainty surrounding the company. With that being said, let’s take a look at what some leading investor groups or thought leaders are saying about Apple Inc.
Valuation Guru: Apple is worth at least $600
A self-proclaimed Apple fan, Aswath Damodaran is a very well-known and prominent figure in the financial industry. Aswath Damodaran is a corporate finance and valuation professor at New York University (NYU), and also teaches valuation to new MBA Associates at various bulge bracket Investment Banks. In addition, he is also a well cited author, and the publisher of numerous equity valuation books and one of the most respected professors in the U.S.
Damodaran was a buyer of Apple stock in 1997 and sold off his stake in early 2012 at a price of $600+, with capital gains most people can only dream of. After a huge sell-off on Apple, Damodaran bought back Apple shares in Jan 2013, at less than $500 and cited that Apple is worth $609.
Professor Damodaran values the company at $609/share using a Discounted Cash Flow (DCF) Analysis that utilizes a cost of capital of 12.5% and a terminal growth rate of 1.8%. He also reiterated his opinions on Apple stock at a recent media appearance earlier this month.
Apple in Goldman's "Conviction Buy List"
After Apple's Q1 Results, Goldman Sachs Analyst, Bill Shope, slashed down his Apple price target to $660 from a previous $760, citing worries about management's guidance. More importantly, Apple sits in Goldman's Conviction Buy List, which is a list comprised of stocks which the investment bank states as having a very high probability of achieving strong returns.
Goldman expects that new products in the coming months will accelerate user growth for Apple products, and also cites that there is already a strong and sticky fan base for the company's products and reiterated its Conviction Buy rating.
Whitney Tilson Dumps Apple Stock
Widely respected value investor, Whitney Tilson sold of his Apple stake at a loss in a letter to investors. Whitney Tilson is one of the founders of the Value Investing Congress, which is a major event in which thousands flock to, in order to see top value investors pitch their best ideas. Whitney Tilson has a phenomenal track record and has been beaten the S&P 500 significantly since his fund's inception. However, his performance in the last two years was weak.
Tilson has had great success especially with companies like Netflix (NASDAQ: NFLX). He pitched Netflix as one of his best ideas in Oct-2012 at the Value Investing Congress when the stock of the Internet Streaming giant was trading for $54. Netflix is now trading at more than $180, thanks to a blow-out quarter. Interestingly, Tilson made money on Netflix on both the long and the short side previously.
In addition, Tilson lists Apple's competitor and the second largest handset maker in the world, Nokia (NYSE: NOK) as one of his biggest short positions. Nokia holds 17.9% market share on a global basis, but the company continues to suffer with respect to profitability, amidst heavy competition from Samsung and Apple.
Whitney Tilson didn't disclose his investment thesis for being short Nokia or for selling out of Apple. However, he did state that Apple is the only stock he sold out off recently at a loss.
Needless to say, there is a lot of uncertainty surrounding Apple. Concerns surrounding success in China and other emerging markets, and the reduced pace of innovation are albeit legitimate ones. While the stock might have upside, in the short-term prices might fluctuate even more, before reaching its intrinsic value.
Checking in with thought leaders is a good idea, whether one is bearish or bullish on Apple, however, it’s not a good idea to bet the house. There are thousands of companies to choose from in the stock market, and one should not put in too many chips on one company.
ishfaque has no position in any stocks mentioned. The Motley Fool recommends Apple and Netflix. The Motley Fool owns shares of Apple and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!