THE APPLE INVESTOR: The Bears Are Calling For A Correction

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AAPL Trading Down With Market
Shares of AAPL are trading down today with the broader tech sector, taking a breather from lofty gains last week. The stock is off about $1 to below $270 or 18x estimated fiscal-year 2010 EPS and 13x Enterprise Value / Trailing Twelve Months Free Cash Flow. At this rate, analysts will soon have to start hastily revising their $300 targets again. Upcoming catalysts include monthly NPD data (Mac / iPod business), the domestic 3G iPad launch date this Friday; international release of the iPad (May 10); and the launch of the next generation iPhone (this summer) as well as the CDMA / Verizon version (rumoured to be ready in time for the holidays).

The Market Is In For A Massive Correction, Will Drag AAPL To $200 Per Share (Fortune)
Apple blogger Andy Zaky warns of a major correction in AAPL due to a broader market correction. According to 90 years of Dow Jones Industrial Average data, all signs point to a huge market correction given the run up. Zaky doesn’t go as far as to say AAPL is overvalued, but “that doesn’t change the fact that it would be dragged down with the market.”  Zaky is still bullish on the company, and wouldn’t be surprised to see Apple hit $300 a share within the next few weeks or $400 in a bull market.  However, the stock will be dragged down by the looming market correction and could see $200 this summer.  Given the strength of the company, recent earnings momentum, and upcoming product launches we find it hard to believe the stock would see such a large 25% “correction” even with broader market weakness.

Seven Reasons Shareholders Should Be Concerned And One Option To Offset Those Fears (The Wall Street Journal)
Brett Arends at The Wall Street Journal explains that Apple shareholders should be weary. The soaring stock price might be too good to be true given the following seven worries: 1) The company is good, but not that good; 2) Sheer fatigue; 3) High share price; 4) Steve Jobs’ ego; 5) Cellular networks; 6) Company backlash; and 7) Steve Jobs’ health. Interested in insurance against your positions now? Buy put options to hedge your bet against downside.

The iPad Is Attracting Microsoft PC Users (Credit Suisse)
Credit Suisse analyst Bill Shope writes that the iPad is attracting none other than Wintel users. Research firm Chitika Labs surveyed 75,000 iPad users and discovered that more than half have PCs running Microsoft Windows. This is one proxy that the iPad will serve as another tool for Apple to reach users outside of its core Mac installed base. In addition, as new users become accustomed to Apple’s offerings (App Store, iTunes, and OS X platforms), Shope believes the familiarity will likely serve as a catalyst to purchase additional Apple hardware.

Apple TV To Remain A Hobby Until Content Reigns King (TechCrunch)
Apple TV will likely generate great margins for the company, but will stay on the back burner until it can attract meaningful content partners. The company has found itself in a classic catch-22; Apple needs premium content to sell the hardware, however Hollywood has been balking for some time signing deals for subscription based services and storing media in the cloud. No doubt Apple is thinking about an App Store for Apple TV and will need content from ABC, Hulu and the like to make Apple TV more than a “hobby.”

Cash-Hoarding Tech Giants Conserve; For What They Don’t Know (Financial Times)
The 10 biggest tech companies have added more than $65 billion or 40% to their balance sheets since last year. The increase in cash has not led to increased M&A activity as activity in the technology industry in 2009 was down nearly one-fifth versus 2008. What will these companies do with their cash? Companies like Microsoft and Google that are facing stiff competition will likely start grabbing larger companies while Apple can cherry pick smaller, more long-term options. Giving the cash back to shareholders via stock buybacks and dividends is also a good option, but unlikely Apple will do so considering the stock is up nearly 30% year-to-date. It doesn’t have to.

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