Apple Inc. (NASDAQ:AAPL) investors have seen the company's stock price drop by 20% in the last three months, sitting just a couple dollars above $500 today. The company was originally over the $500 mark last February, meaning most of its gains in 2012 are meaningless at this point.
The Cupertino-based company is, however, still a tech giant, and its sales are growing rather than falling. The firm's earnings are also growing at a quick rate. The problems with the firm do not lie with the fundamentals, nor do they rely on the firm's valuation. Excluding cash, the firm's P/E ratio has sunk below 10.
So, the Wall Street Journal asks today, is it time to start looking at Apple Inc. (NASDAQ:AAPL) as a value stock? According to research cited in the report, mutual funds concentrating on growth stocks have begun to shed the firm's stock, while those looking for value have started accruing it.
According to those statistics, the numbers of growth based funds holding Apple Inc. (NASDAQ:AAPL) stock fell from 82% to 77% in the year between December 2011 and September 2012. The numbers of value based mutual funds holding the stocks increased from 29% to 40% in the same time period.
A report released earlier today, suggested that the company has cut is order for components used in the manufacture of the iPhone 5. Sales of the company's premium smart phone are not as strong as the company's executives expected, that is a serious worry for investors in the company, but sales are still likely to be strong, and the firm's profits are still likely to grow year on year.
Can Apple Inc. (NASDAQ:AAPL) be truly considered a value stock, or even an equity transitioning to a value stock rather than a growth stock. If Apple's dividend were to be set higher in the future, the stock may become very attractive to investors looking for a slower growing more stable equity, but right now that does not seem to be Apple.
Though the company is fundamentally strong, most of its investors are waiting for the company to release the next big consumer electronics product, as it did with the iPhone and the iPad. As long as investors are waiting for indications that the company is about to start growing at a fiendish pace again, its stock price will not be stable.
Apple Inc. (NASDAQ:AAPL) stock does seem to have a limited downside at the moment, at least in terms of headline pressure. A report that suggests the company is not going to sell as many units of the iPhone 5 caused a drop of just 3%, that's a normal day's volatility for the company. If the firm were to announce a bigger change in strategy, like a new product line, or a shorter upgrade cycle the bump would likely be much bigger.
There are different directions the firm's stock could go, but it is incredibly exposed to positive pressure from a change at the company. It is much less exposed to price compression at its current P/E, though David Einhorn made similar statements about the company's stock when it was trading well above $600.
Apple will release its earnings for the last three months of 2012, the company's second fiscal quarter 2013 on January 23rd. Investors will be studying the numbers closely, particularly for signs of weakness in iPhone 5 sales. That day will certainly be an interesting one, if the firm's management cares anything about its stock price, there will need to be serious reassurances given during the conference call.
In the mean time, assuming there are no major changes in the day between then and now, Apple Inc. (NASDAQ:AAPL) shares are unlikely to jump back to September levels, nor are they likely to drop to levels seen this time last year. Apple may not be a value stock now, but it may be heading that way.
If Apple Inc. (NASDAQ:AAPL) eschews major innovation, and simply continues to upgrade its outstanding current range of products, it may settle into the role of an ordinary blue chip company. Continued profit sharing by dividends would reinforce this. Apple is still a growth stock, at least until it becomes clear that the company has stopped serious innovation. That day seems unlikely to come any time soon.