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Apple (AAPL) Isn’t Rotten Yet

With a PE multiple of less than 10, Apple is ripe for the picking


Last week, I discussed why I believed that the selloff in Apple (NASDAQ:AAPL) wouldn’t mean as much for the broader markets as some analysts would have you believe. Lo and behold, Apple finally stabilized on Monday for the first time since its disappointing earnings report last week.

It is quite fascinating to see how quickly attitudes change about stock values, and how we can see a massive paradigm shift in less than 10 years. Apple is one of the most successful companies of all time, and although guidance that failed to beat the Street was mainly to blame for the downturn, the company achieved one of the best quarters a company has ever had in the last three months of 2012.

Shares of the mobile communications pioneer were disconnected to the tune of 12% since the report, but just look at the valuation compared to what we saw during the tech bubble era of the late 1990s. Apple is now selling for a PE multiple of less than 10, which is much lower even than less-accomplished companies in its peer group. Compare that to 2000, when peers like Yahoo! (NASDAQ:YHOO), Cisco (NASDAQ:CSCO), Qualcomm (NSADAQ:QCOM) and the like were selling for well over 100 times earnings — even though all the excitement was over potential results in the future, not what was being delivered at that time. Microsoft (NASDAQ:MSFT) was going for 60 times and considered a bargain.

Economist Jeremy Siegel looked at this condition over the weekend and made an important conclusion and I could not agree more: “We live in a whole new world where there is virtually no fluff in the market. That is why this bull has legs.”

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days.

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