Monday, March 07, 2011

Stop Excoriating Apple

By Eric Jackson
RealMoney Contributor

3/7/2011 1:45 PM EST
Click here for more stories by Eric Jackson

There is a wide perception that Apple (AAPL -commentary - Trade Now) is universally beloved by investors and customers alike, but there's actually quite a bit of criticism of the company to be found. Here are the top complaints that I've heard and why I believe they're off the mark.

"Everyone likes Apple. It's a one-sidedtrade."

There are 63 analysts at last count covering Apple. Of those, three have a Hold on the stock and only one has a Sell. Critics howl that this is a sure sign of the world seeing Apple through rose-colored glasses. They point to the dot-com bubble and say that Apple's story will also end in tears.

Time for a reality check. Yes, Apple is liked and admired by investors almost to the point of being a cult, but there is good reason for this. Anyone who goes into an Apple store and compares the experience to any other retailer knows that there is a much deeper and obvious connection between Apple users and their products.

Although Apple is recommended by most analysts, they are still way too conservative in their estimates for future earnings, which I'll address in more detail later. That conservatism is, in fact, an opportunity, compared with a stock where five out of 10 analysts rate it a Buy and the rest rate it a Sell.

"It's too expensive."

We see $360 and we know that Apple is one of the most expensive stocks on the Street for a single share. Additionally, we know that Apple currently has the second-highest market capitalization in the world at $327 billion, behind Exxon Mobil's (XOM - commentary - Trade Now) $424 billion. There's an urge to think that if something is among the most expensive, it has nowhere to go but down, hence all the hand-wringing. I even read one complaint that although Apple is second in market capitalization, it's not even in the top 20 for total revenues.


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