Apple Inc. (AAPL): Cut Losses, Hold, or Double Down?

We can compare Apple to Google Inc (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Research In Motion Limited (NASDAQ:RIMM), and Microsoft Corporation (NASDAQ:MSFT). There is an incredible variety of valuations in the market in terms of earnings. Amazon, for example, is barely profitable and yet its enterprise value is over $100 billion; even 2013 consensus implies a very high current-year P/E multiple of 159. Revenue growth remains high- 27%- but we think that the company will have very shortly start seeing even high growth rates than that in earnings to justify its current price. Research in Motion has risen 150% in the last six months on the strength of BlackBerry sales projections, though Wall Street doesn’t expect the company to turn a profit this year. We think it should be avoided.

Google trades at 14 times forward earnings estimates, and the company is showing progress in integrating Motorola Mobility with net income up 7% last quarter versus a year earlier. Microsoft’s forward P/E of 9 is about even with Apple’s; with that company likely seeing a temporary boost to earnings from the sale of Windows 8 and the new version of Office, with it having a smaller cash position than Apple, and with its brand and market position being arguably poorer, it’s tough to recommend Microsoft over Apple.

Apple’s days as a high growth company are over, but the stock price has fallen enough that it seems like a good value for a technology company. The market cap is about 10 times trailing earnings, and EPS should not shrink much (if at all) over the next year. In terms of enterprise value the stock is even cheaper. We don’t think that investors should be selling Apple right now. In fact, it looks like a good value though we would not recommend concentrating too much of a portfolio in the stock. If it is already a sizable position buying more shares might be too much of a risk.

Disclosure: I own no shares of any stocks mentioned in this article.