Apple Inc (AAPL)

[langostino]

"where to bottom-fish?"

"In the absence of Apple-specific news, I'm inclined to think the current selloff is to raise funds to meet financials-generated margin calls."

Dunno what qualifies as "Apple-specific", but here are some of the things we've learned most recently:
(1) unit sales growth in Macs has fallen from 41% last quarter to 23% this quarter
(2) Dell has reported that it sees softness across all PC markets, most particularly small businesses
(3) a boatload of economic data shows the consumer environment continues to weaken
(4) the consumer, in general, is being bombarded with fear-inducing news and headlines daily
(5) analysts are lowering their estimates for Apple's Rev and EPS (note that while analysts tend to put out big press releases and get on TV and the media to promote, promote, promote when they're raising estimates, they tend to slide their downward revisions silently in under the radar).

Is a weakening consumer environment "Apple-specific"? No. Does it impact Apple just the same, regardless of whether it happens to impact everyone else as well? Yes.

Will consumer spending on Apple products be affected by such generalized things as "news headlines"? Every retail economic study ever done will tell you yes. For anecdotal support, just ask anyone in your circle of colleagues, friends, neighbors, etc. Is that "Apple-specific"? No. Is it any less impactful on Apple b/c it impacts other businesses? No!

None of that may help you in where to go bottom-fishing.

But if you went straight by analyst consensus views as a sort of baseline, then you've got two things going on at once: falling E estimates, and falling E growth rates. That means p/e compression, and the P falling at higher velocity than the E.

Consensus is now for 16% eps growth rate in '09. Because analysts tend to be behind the curve, it is almost certain you'll see the consensus numbers fall, and see both the absolute E number fall, but also the growth rate. It would hardly be unreasonable to think consensus eps falls from the current $6.05 down to say $5.75 in coming weeks. That would produce annual growth of just over 10%.

What kind of p/e the market will want to hang on 10% growth when the direction of revisions is pointed downward, is the key question.

As for the trader's question - where's the chart point, I'd say it points to February and $115.