THE APPLE INVESTOR: Stock Going Lower, Although Fundamentals Indicate The Contrary

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AAPL Down With The Markets
The major indices are taking a more than 1% dive in early trading after warnings about the finances of several European countries. Shares of AAPL, having struggled for the past 9 months are not immune and are down about $3. Upcoming catalysts include the WWDC starting June 6; iPad 2 sales updates; the next iPhone launch this fall; smartphone push into China and emerging markets; iTunes and other cloud initiatives; the continued evolution and adoption of Apple TV; and new platforms such as video, books / publishing and social (Ping). Shares of Apple trade at 11x Enterprise Value / Trailing Twelve Months Free Cash Flow (incl. long-term marketable securities).

iPad Production Limitations Improve… (Electronista)
Production limitations that were hurting iPad shipments last quarter have “significantly improved,” with “better yields and higher output due to successful retooling and conversion of more production lines to iPad 2,” according to Sterne Agee analyst Shaw Wu. Following a mid-quarter channel check, Wu raised his unit sales estimates as well as his price-target to $460.

…But Recent Foxconn Explosion Could Lead To Shortages Again (PC World)
There was an explosion at Foxconn killing three people late Friday. The building in question was dedicated to iPad production. Analyst Mike Abramsky of RBC Capital said that the worst-case scenario is that iPad production will be reduced by 2.8 million units, a drop of 36% for third-quarter production against an estimated production run of 8 million units. The best scenario is that production will be reduced by less than 1.3 million units as Foxconn makes repairs.

Liberty Media Jumping Into The EBook Game To Take On iPad And Kindle (Fast Company)
Liberty Media proposed a deal to purchase Barnes & Noble for $1.02 billion. Why would CEO John Malone bid for a company whose competitors, like Borders, are on life support? It’s all about Nook and eBooks. Barnes & Noble had the foresight to bite the electronic bullet, launching the Nook in 2009. Analysts are reacting to the deal with cautious optimism, most of them citing positive sales results and forward-looking hopes for the Nook.

Apple Stock Is Headed South (Seeking Alpha)
S&P 500 futures are at a pivotal price point at 1340 (as of Friday), with the path of least resistance seeming to be a technical and fundamental drop to support. Adding to the potential negativity on equity indices is the outlook on high profile stocks, and the changes in first quarter hedge fund holdings. It would seem that Apple has lost the title of most widely held hedge fund holding, after 22 funds (over 10% of the total 195 that held Apple previously) closed their entire holdings of Apple, which will certainly impact the intra-day dynamics of the market going forward.

Apple Valuation Lowest Since Financial Crisis (Seeking Alpha)
While Apple’s revenue and earnings have skyrocketed over the past few quarters, its stock price has barely advanced since reaching $320 in late October, not even out performing the NASDAQ-100. The stock has simply been unable to keep pace with its explosive 90%+ growth in earnings with its P/E ratio falling to levels seen during the depths of the financial crisis. It’s no wonder the average American investor no longer has any trust in equities. Who wants to invest in a system that doesn’t reward investors when they’re right about a company’s fundamentals, earnings and valuation?