Is Apple on the Verge of Collapse?

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Apple (NAS: AAPL) is more than 10% off its highs for the year as a litany of less than stellar news has caused some fearful investors to flee the stock. First it was Apple's "earnings miss," when the company reported revenue and profits below what Wall Street analysts were expecting. Then it was rumors of slowing demand for Apple's iPhone based on "supply checks."

More credible threats such as competition from Amazon.com (NAS: AMZN) and its recently launched Kindle Fire are also causing some Apple investors to get jittery. At $199, the Kindle Fire is priced well below the iPad and no doubt will take some share from Apple in the tablet market. We could even end up with an iPad price cut.

Google's (NAS: GOOG) Android smartphone operating system is giving Apple investors indigestion as well, with some outstanding Fool analysts praising Android's performance. Some investors are even worried that Microsoft's (NAS: MSFT) new Windows 8 OS could help it claw back some market share in the smartphone and tablet markets.

These are all legitimate concerns and should not be taken lightly. But competition is nothing new to Apple, and I believe that much of these fears are already baked into the stock price.

As for Apple's so-called earnings miss, the company surpassed its own guidance for the fourth quarter and then went on to issue guidance above Wall Street's expectations for the current quarter. As for the rumors regarding slowing iPhone demand, my esteemed Foolish colleague Eric Bleeker pointed out that these types of warnings have in the past often been misguided, and investors and even professional analysts often misinterpret their impact on Apple's earnings.

I will not dismiss the threat from Amazon and Google, but I have accounted for this in my valuation model for Apple, including potential lower average selling prices for the iPad and iPhone.

And what if Apple remains ... Apple? What if booming international sales help Apple sell many more iPhone 4S units than analysts are currently expecting? What if Apple continues to innovate and launches a blockbuster new Apple TV sometime next year? What if Tim Cook turns out to be an excellent CEO and superbly executes the long-term strategic plan that he and Steve Jobs put in place? Could Apple -- dare I say it -- continue to outperform?

I believe the answer is yes. And I'm ready to put real money behind that statement. In addition to being the largest holding in my personal portfolio, Appl.e is also my first recommendation and a core holding in my Motley Fool Tier 1 Investments Rising Star Portfolio. And on the next business day after this article is published, Tier 1 Investments will be adding to its Apple position.

If you're interested in hearing about three under-the-radar companies quietly cashing in on the booming smartphone and tablet PC markets, you can check out The Motley Fool's latest special free report: "3 Hidden Winners of the iPhone, iPad, and Android Revolution." The report is yours today,absolutely free.

At the time this article was published Joe Tenebruso manages a real-moneyRising Star Portfoliofor The Motley Fool and is an analyst on The Motley Fool's Million Dollar Portfolio and Income Investor premium services. Joe has written puts on Apple.The Motley Fool owns shares of Apple, Google, and Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, Amazon.com, Apple, and Google and creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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