As of 12:55PM ET, Apple (AAPL) is down 8% and trading around $89, more than 50% off its high.
The stock’s trailing P/E ratio is now 17X–still above the market’s, but low for a stock with this wide and passionate a following and a still-solid growth story. Thanks to the iPhone’s attractive cash-flow characteristics, moreover, the stock is now trading at just over 10X trailing free cash flow after factoring out the company’s cash balance.
A few weeks ago, when we noted that Apple’s stock had fallen 33% off its high, we suggested that, if market conditions deteriorated further, the stock could drop to $70. It obviously still could. In the old days, 10X-15X was considered a reasonable P/E multiple for a hardware manufacturing firm, even one as sexy as this.
Apple is also obviously exposed to the global slowdown, and its earnings will likely get hammered over the next year. Also, as illustrated by the market’s temporary panic over a Steve Jobs heart attack report, the company needs a succession plan.
But that said… most of what people about Apple when the stock was $180 still holds true. As Warren Buffett has said many times, the best time to buy stocks is when others are fearful. Apple investors, like other stock-market investors, and close to panic right now.
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