It's Time to Buy Apple


This is just getting silly.

Over the past six weeks, Apple (NAS: AAPL) has seen the mother of all sell-offs, pulling back over 20% from its all-time high and officially entering "bear market" territory. So far today, shares have traded as low as $541.19. That's a solid 23% lower than the intraday all-time high of $705.07 set on the very day that the iPhone 5 launched at the end of September.

AAPL Chart
AAPL Chart

AAPL data by YCharts.

That also represents a loss of $154 billion in market cap. That's nearly 50% more than Intel's (NAS: INTC) entire valuation lost in a matter of seven weeks.

Why ask why?
As far as culprits for the pullback, there are a number of candidates, some more legitimate than others. However, even the ones that make sense are entirely short-term in nature. Let's go through them.

The most viable source of pessimism is that the iPhone 5 remains supply constrained. The device was launched over two months ago, sold 5 million units over its launch weekend (which disappointed investors), and to this day remains constrained. New orders on Apple's site are still quoted shipping times between 3 and 4 weeks, and we're almost halfway through the fourth quarter.

Just this week, Foxconn Chairman Terry Gou said that his company has been having difficulty manufacturing sufficient quantities of the iPhone 5, saying the company was "falling short of meeting the huge demand." As Apple's most important product by far (over half of last year's revenue), continued shortages are definitely bad news. Having too much demand is a problem that most companies are envious of, but it's still a problem nonetheless.

There was also the management shakeup: iOS chief Scott Forstall is on his way out. Forstall's duties were split up among remaining execs -- most notably with industrial design head Jony Ive taking over "human interface." The move streamlines Apple's organization structure, but also adds a touch of uncertainty.

Apple also unveiled the iPad Mini, but played its launch figures close to the chest. This device is also somewhat hard to come by. While that addresses concerns that it's priced too high, Apple could still be facing unmet demand.

To the extent that Apple's obsession with quality entails supply constraints, that focus becomes a risk factor.

One of these is not like the others
Let's back this up with some valuation figures to drive home just how cheap Apple's become over the past two months.




EPS Growth (TTM)

Net Margin (TTM)











Microsoft (NAS: MSFT)





Google (NAS: GOOG)





Source: Reuters. TTM = trailing 12 months.

It's hard to argue that Apple isn't a downright steal right now. It's more profitable than these other tech titans, trounces them in growth, and is cheaper than Microsoft and Google. Intel's cheaper but its bottom line has been flat in the face of a struggling PC market. Microsoft has blown billions trying to compete with Google in online services and advertising. Google remains top dog in online ads but is facing growth deceleration.

Apple? Never been better.

Source: Apple 10-K. Fiscal years shown.

What's even more mind-boggling about the recent weakness is that investors are currently staring an all-time record quarter in the eye right now. That's a fact.

The December quarter's lowball guidance is targeting $52 billion in sales, topping last December's record $46.3 billion. On top of that, this year's product lineup heading into the all-important holiday shopping season is much stronger than it was last year. The iPhone 5 is a bigger upgrade than the iPhone 4S was, the new iPad Mini is going to fill many stockings (it fits perfectly!), and the iPad 4 also got spec bumped.

The iMac has just gotten a dramatic redesign, and MacBook Pros now sport Retina displays. That includes the 13-inch version, which is Apple's top-selling notebook model.

Combined, these products that were just introduced will drive 80% of sales this quarter. This is going to be a monster quarter. Mark my words: get in while you still can.

Apple has enormous opportunities still waiting to be tapped. The iPhone and iPad have garnered nearly unstoppable momentum, which is precisely why we've recently added two bonus reports to our premium Apple research service on those two products. During Apple's current weakness, investors may want some reassurance on Apple's prospects, so get started by clicking here.

The article It's Time to Buy Apple originally appeared on

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Intel, and Microsoft. 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.

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