I was surprised to see Apple (AAPL) get downgraded today by Shebly Seyrafi of Calyon Securities. Basically, he thinks that Apple’s products are too expensive. He may be right, but I have to say that I’m not so concerned about Apple’s pricing.
Obviously, a normal company that relies on a premium-pricing strategy is highly vulnerable during a recession. Shoppers are very price conscious and they’ll quickly turn to a cheaper alternative. My issue is that Apple isn’t a normal company. Despite the problems in the broader economy, Apple’s products are still wildly popular.
This is from what I wrote last June on Apple’s ability to defy expectations:
“Apple originally expected to sell one million iPhones its first year on the market, when really sales approached four million. The company expects to sell 10 million iPhones over the 12 months following the re-launch. If current rates apply, we can assume that Apple’s forecast is conservative.”
Look at what happened last month when Apples reported its first-quarter earnings. The company earned $1.78 a share which was 39 cents better than Wall Street’s consensus. I should add that Apple is one of the most heavily followed stocks on Wall Street–and over 30 analysts still missed the story!
If you’re looking for a bargain, I currently have a Buy rating on Apple in Portfolio Grader. The stock is basically where it was two years ago even though earnings have soared. I especially like that Apple has zero debt and $28 a share in cash. That’s a great balance sheet during a rotten economy.