If it wasn't such a game of expectations, Wall Street would be honoring Apple (AAPL) today and its stock would be soaring in the wake of another quarter of record sales and earnings. However, falling short of expectations in the investment world is like stepping out of bounds by only an inch, nullifying an incredible catch in football.
While CEO Tim Cook described Apple's results as "extraordinary" on the company's conference call late yesterday, the simple fact remains that by several key measures the company grew less than analysts expected. The disappointment is tangible, triggering a sell-off that's taken the stock to levels not seen in a year. But it is also tempting, given that shares are now down 35% from their all-time high of $705 hit just four months ago.
"I think you got to hold your nose and buy here," says Eric Jackson, founder of Ironfire Capital. "In the past, when Apple has gone on runs, it usually comes when there's this mass negativity in the air like there is now."
Certainly, not everyone agrees with Jackson, as no less than six different analysts have cut their outlooks or estimates or price targets so far today, bringing the median price target down to $647 from $792 in a matter of months.
Jackson says the fear about Apple running up against "the law of large numbers" has been out there for about five years, but he concedes that he is ''just not in that camp" and would be looking to add to his position since the company continues to innovate and execute well. "What seems to happen with Apple is that we overshoot on our excitement on the upside and then conversely, when we worry about growth, they tend to overshoot on the downside."
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Another area where Jackson is out of sync with the masses is over the the company's $137 billion in cash. He points out that a growing number of Apple-watchers are starting to dismiss this money mountain from their valuations since they believe the company will never spend it. "I'm convinced that at some point they're going to use the cash for some kind of larger acquisitions than they've done historically."