Van and I own a lot of the same stocks. I respect and admire his abilities. This is the first time we've taken opposite positions. I hope we both will do well. I've taken a short position in Apple when I though it would correct, myself. I have to be hit over the head with it, though.
Here's the WSJ piece. Nice to see something positive about Apple in the popular investment press. I can't believe they published that Disney takeover rumor, and had someone knock it. They must be reading our thread. Hi, Sue Pullam! Thank you!
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Headline: (UPDATE) Heard On The Street: Apple's Rosy Rise Tied To Marketing
Strategy
======================================================================
By Susan Pulliam, Staff Reporter of The Wall Street Journal
Quick, what's the best-performing personal-computer stock this year?
Dell, you say? Wrong!
Try Apple Computer. It has been on a tear since the beginning of the
year, doubling its price since the end of 1997 to $26.3438 on the Nasdaq
Stock Market yesterday. Wall Street's darling, Dell Computer, by
comparison, is up about 48% for the year.
Why should broken-down Apple be outperforming the rest of the PC
pack?
One big reason, investors say, is that Apple is going head-long after
the low-end consumer market while shares of the PC giants are getting
slammed by a slowdown in demand in the corporate market.
Among the Apple products creating a buzz on Wall Street is a
mysterious so-called "convergence" product code-named Columbus that is
to be launched sometime this year. It would combine a television,
computer and video player in one box.
But it is more than just mysterious projects that have Apple's stock
moving. Wall Street is calling for a profitable fiscal second quarter
for Apple ending in March, following a $47 million profit in its fiscal
first quarter ended in December. The repeat performance has some
investors believing that the fallen computer maker may have finally
turned the corner to steady profits. And there is nothing Wall Street
likes better than predictability.
"It's clear that investor perceptions are changing," Andrew Neff, a
Bear Stearns analyst, said in a recent note to clients. "The question is
not 'will Apple survive? but what will Apple earn?'" he says.
To be sure, even the bulls caution that Apple's shares may take a
breather after their run-up, especially if revenue growth doesn't kick
in for a while. What's more, even in the best of all worlds, Apple will
be only a shadow of its former self as a profitable niche player,
investors say.
But the picture is the best it has been in a while, some investors
say. "For two years they have done nothing but forfeit markets," says
Prudential Securities analyst Don Young. "Now there is a push back into
the consumer space," he says, adding "it's the first sign we've seen
that they are in an attack mode."
Even some of Apple's critics say its new products sound interesting.
"Columbus holds promise for them," says Matt Sargent, an analyst with
Computer Intelligence in La Jolla, Calif. "At least they'd be getting
into something that isn't standardized."
Apple officials have confirmed Columbus's existence, though they have
declined to discuss details. But Wall Streeters describe it as a box
that would look like a television receiver but could also function as a
computer or digital video disk player, for instance. It would also carry
a price tag below $1,000 in order to capture demand for the under-$1,000
PC market.
Apple's new-product lineup includes more than just Columbus, however,
says Prudential's Mr. Young. The PC maker is also expected to introduce
a plain-vanilla computer with a price tag under $1,000 before the end of
the year, along with $1,500 and $2,000 models, adding to its G3 lineup
of computers in the midprice range. It is also expected to come out with
new notebook products.
"A lot of people view them (Apple) as irrelevant. But this will give
them a full breadth of products," Mr. Young says.
The Street is also beginning to believe in Apple's slash-and-burn
strategy launched last year, which removed its computers from the
shelves of most retailers except CompUSA, which now sells Apple
computers in so-called "stores within a store," and is expected to
heavily promote the product, says Lou Mazzucchelli, an analyst with
Gerard Klauer Mattison, who rates Apple a "buy."
Meanwhile, takeover rumors continue to boost Apple shares, with the
latest talk centering on Walt Disney, an idea most analysts dismiss
completely. "The potential buyers for Apple get more and more
far-fetched," says Oppenheimer analyst James Poyner. "It's pretty wacky
stuff."
Analysts say the biggest argument for Apple stock is its relatively
low valuation, however, even after its recent run-up. "As investor
perceptions shift regarding Apple from a company with nowhere to go to a
company with a future, we could see further expansion in its stock
price-to-sales multiple from its current level of 54% to a range of 70%
to 100% of sales (or $30 to $45 a share,) Mr. Neff says in the note to
clients.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved. |
